EXHIBIT 4
--------------------------------------------------
FALCON PRODUCTS, INC.,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INDUSTRIES, INC.
AND
SELLERS & ▇▇▇▇▇▇▇▇▇ INC.
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
LOAN AND SECURITY AGREEMENT
DATED: JUNE 3, 2003
$75,000,000
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
FLEET CAPITAL CORPORATION
INDIVIDUALLY AND AS AGENT FOR ANY LENDER WHICH IS
OR BECOMES A PARTY HERETO
--------------------------------------------------
TABLE OF CONTENTS
Page
----
SECTION 1. CREDIT FACILITY...................................................1
1.1. Loans............................................................1
1.2. Letters of Credit; LC Guaranties.................................4
1.3. Term Loans.......................................................5
1.4. Borrowing Agent..................................................5
SECTION 2. INTEREST, FEES AND CHARGES........................................6
2.1. Interest.........................................................6
2.2. Computation of Interest and Fees.................................7
2.3. Fee Letter.......................................................7
2.4. Letter of Credit and LC Guaranty Fees............................7
2.5. Unused Line Fee..................................................8
2.6. Prepayment Fee...................................................8
2.7. Audit Fees.......................................................9
2.8. Reimbursement of Expenses........................................9
2.9. Bank Charges....................................................10
2.10. Collateral Protection Expenses; Appraisals......................10
2.11. Payment of Charges..............................................11
2.12. Term Loan B Fee Letter..........................................11
2.13. No Deductions...................................................11
2.14. Joint and Several Obligations...................................11
SECTION 3. LOAN ADMINISTRATION..............................................14
3.1. Manner of Borrowing Revolving Credit Loans/LIBOR Option.........14
3.2. Payments........................................................17
3.3. Mandatory and Optional Prepayments..............................20
3.4. Application of Payments and Collections.........................24
3.5. All Loans to Constitute One Obligation..........................25
3.6. Loan Account....................................................26
3.7. Statements of Account...........................................26
3.8. Increased Costs.................................................26
3.9. Basis for Determining Interest Rate Inadequate..................27
3.10. Sharing of Payments, Etc........................................28
3.11. Post Event of Default Allocation................................29
SECTION 4. TERM AND TERMINATION.............................................30
-i-
4.1. Term of Agreement...............................................30
4.2. Termination.....................................................30
SECTION 5. SECURITY INTERESTS...............................................31
5.1. Security Interest in Collateral.................................31
5.2. Other Collateral................................................33
5.3. Lien Perfection; Further Assurances.............................33
5.4. Lien on Realty..................................................34
5.5. Pledge of Securities............................................34
SECTION 6. COLLATERAL ADMINISTRATION........................................35
6.1. General.........................................................35
6.2. Administration of Accounts......................................36
6.3. Administration of Inventory.....................................37
6.4. Records and Schedules of Equipment..............................38
6.5. Payment of Charges..............................................38
SECTION 7. REPRESENTATIONS AND WARRANTIES...................................38
7.1. General Representations and Warranties..........................38
7.2. Continuous Nature of Representations and Warranties.............46
7.3. Survival of Representations and Warranties......................47
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS..............................47
8.1. Affirmative Covenants...........................................47
8.2. Negative Covenants..............................................51
8.3. Specific Financial Covenants....................................59
SECTION 9. CONDITIONS PRECEDENT.............................................60
9.1. Documentation...................................................60
9.2. No Default......................................................60
9.3. Other Conditions................................................60
9.4. Availability....................................................60
9.5. No Litigation...................................................60
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT...............61
10.1. Events of Default...............................................61
10.2. Acceleration of the Obligations.................................64
10.3. Other Remedies..................................................65
10.4. Set Off and Sharing of Payments.................................66
-ii-
10.5. Remedies Cumulative; No Waiver..................................67
SECTION 11. THE AGENT; CERTAIN PROVISIONS RELATING TO LENDERS...............67
11.1. Authorization and Action........................................67
11.2. Agent's Reliance, Etc...........................................68
11.3. Fleet and Affiliates............................................69
11.4. Lender Credit Decision..........................................69
11.5. Indemnification.................................................69
11.6. Rights and Remedies to be Exercised by Agent Only...............70
11.7. Agency Provisions Relating to Collateral........................70
11.8. Agent's Right to Purchase Commitments...........................71
11.9. Right of Sale, Assignment, Participations.......................71
11.10. Amendment.......................................................75
11.11. Resignation of Agent; Appointment of Successor..................77
11.12. Audit and Examination Reports; Disclaimer by Lenders............77
11.13. Buyout Right....................................................78
SECTION 12. MISCELLANEOUS...................................................79
12.1. Power of Attorney...............................................79
12.2. Indemnity.......................................................80
12.3. Sale of Interest................................................81
12.4. Severability....................................................81
12.5. Successors and Assigns..........................................81
12.6. Cumulative Effect; Conflict of Terms............................81
12.7. Execution in Counterparts.......................................81
12.8. Notice..........................................................82
12.9. Consent.........................................................83
12.10. Credit Inquiries................................................83
12.11. Time of Essence.................................................83
12.12. Entire Agreement................................................84
12.13. Interpretation..................................................84
12.14. Confidentiality.................................................84
12.15. GOVERNING LAW; CONSENT TO FORUM.................................84
12.16. WAIVERS BY BORROWERS............................................85
12.17. Advertisement...................................................86
SECTION 13. THE TRANCHE B AGENT.............................................86
13.1. Authorization and Action........................................86
13.2. Tranche B Agent's Reliance, Etc.................................87
13.3. Back Bay and Affiliates.........................................88
13.4. Term Loan B Lender Credit Decision..............................88
13.5. Indemnification.................................................88
-iii-
13.6. Rights and Remedies to be Exercised by Tranche B Agent Only.....89
13.7. Agency Provisions Relating to Collateral........................89
13.8. Tranche B Agent's Right to Purchase Commitments.................90
13.9. Resignation of Tranche B Agent; Appointment of Successor........90
13.10. Information Sharing.............................................90
13.11. Rights of Term Loan B Lenders...................................91
-iv-
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made as of this 3rd day of
June, 2003, by and among FLEET CAPITAL CORPORATION ("Fleet"), a Rhode Island
corporation with an office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, individually as a Lender and as Agent ("Agent") for itself
and any other financial institution which is or becomes a party hereto (each
such financial institution, including Fleet, is referred to hereinafter
individually as a "Lender"), the LENDERS and each of FALCON PRODUCTS, INC.,
a Delaware corporation with its chief executive office and principal place
of business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("Falcon"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INDUSTRIES, INC., a Delaware corporation with
its chief executive office and principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Shelby"), AND SELLERS &
▇▇▇▇▇▇▇▇▇ INC., a New Jersey corporation with its chief executive office and
principal place of business at ▇▇ ▇▇▇▇▇ ▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
("Sellers & ▇▇▇▇▇▇▇▇▇"). ▇▇▇▇▇▇, ▇▇▇▇▇▇ and Sellers & ▇▇▇▇▇▇▇▇▇ are
hereafter referred to collectively as "Borrowers" and individually as a
"Borrower". Capitalized terms used in this Agreement have the meanings
assigned to them in Appendix A, General Definitions. Accounting terms not
otherwise specifically defined herein shall be construed in accordance with
GAAP consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lenders agree to make a Total Credit Facility of up to
$75,000,000 available to Borrowers upon a Borrower's request therefor, as
follows:
1.1. Loans.
-----
1.1.1. Revolving Credit Loans. Each Revolving Credit and Term Loan A
----------------------
Lender agrees, severally and not jointly, for so long as no Default or
Event of Default exists, to make Revolving Credit Loans to Borrowers
from time to time during the period from the date hereof to but not
including the last day of the Term, as requested by Borrowers in the
manner set forth in subsection 3.1.1 hereof, up to a maximum principal
amount at any time outstanding equal to the lesser of (i) such
Revolving Credit and Term Loan A Lender's Revolving Loan Commitment
minus the product of such Revolving Credit and Term Loan A Lender's
-----
Revolving Loan Percentage and the LC Amount minus the product of such
-----
Revolving Credit and Term Loan A Lender's Revolving Loan Percentage and
reserves, if any and (ii) the product of such Revolving Credit and Term
Loan A Lender's Revolving Loan Percentage and an amount equal to the
Borrowing Base at such time minus the LC Amount minus reserves, if any.
----- -----
The aggregate amount of the Revolving Loan Commitments is $33,769,000.
Agent shall have the right to establish reserves in such amounts, and
with respect to such matters, as Agent shall deem necessary or
appropriate in its reasonable credit judgment, against the amount of
Revolving Credit Loans which
-1-
Borrowers may otherwise request under this subsection 1.1.1 including
without limitation with respect to (i) price adjustments, damages,
unearned discounts, returned products or other matters for which credit
memoranda are issued in the ordinary course of a Borrower's business;
(ii) potential dilution related to Accounts; (iii) shrinkage, spoilage
and obsolescence of a Borrower's Inventory; (iv) slow moving Inventory;
(v) other sums chargeable against a Borrower's Loan Account as
Revolving Credit Loans under any section of this Agreement; (vi)
amounts owing by a Borrower to any Person to the extent secured by a
Lien on, or trust over, any Property of any Borrower (other than
Permitted Liens described in any of subsections 8.2.5(i), (iv), (v),
(vi), (x), (xi), (xii) or (xiii)); (vii) amounts owing by a Borrower in
connection with Product Obligations; (viii) during the period from the
Closing Date through and including June 15, 2003, an amount equal to
$5,700,000 in respect of accrued interest on the Subordinated Note Debt
due on June 15, 2003 (provided, that such reserve shall be released at
the time of payment of such interest); and at all times thereafter, an
amount equal to then accrued and unpaid interest on the Subordinated
Note Debt, with such amount to be adjusted on a monthly basis, on the
last day of each calendar month (provided, that such reserve shall be
released at the time of each payment of such interest); (ix) the
Special Reserve; (x) the Rebuild Reserve; and (xi) such other specific
events, conditions or contingencies as to which Agent, in its
reasonable credit judgment, determines reserves should be established
from time to time hereunder. Notwithstanding the foregoing, (a) the
reserves described in clauses (viii), (ix) and (x) above shall be
implemented and maintained by Agent unless otherwise agreed by Required
Lenders, (b) the reserves implemented under clause (x) shall be
released as necessary to permit replacement or repair of the subject
Property, as provided in subsection 3.3.1(a) or subsection 8.2.9(iv),
as applicable, (c) Agent shall not establish any reserves in respect of
any matters relating to any items of Collateral that have been taken
into account in determining Eligible Inventory or Eligible Accounts, as
applicable and (d) the Special Reserve shall no longer be required and
shall be terminated upon the payment in full of Term Loan B. The
Revolving Credit Loans shall be repayable in accordance with the terms
of the Revolving Notes and shall be secured by all of the Collateral.
1.1.2. Overadvances. Insofar as Borrowers may request and Agent or
------------
Revolving Credit and Term Loan A Lenders (as provided below) may be
willing in their sole and absolute discretion to make Revolving Credit
Loans to Borrowers at a time when the unpaid balance of Revolving
Credit Loans plus the sum of the LC Amount plus the amount of LC
Obligations that have not been reimbursed by Borrowers or funded with a
Revolving Credit Loan, plus reserves, exceeds, or would exceed with the
making of any such Revolving Credit Loan, the Borrowing Base (such Loan
or Loans being herein referred to individually as an "Overadvance" and
collectively, as "Overadvances"), Agent shall enter such Overadvances
as debits in a Borrower's Loan Account. All Overadvances shall be
repaid on demand, shall be secured by the Collateral and shall bear
interest as provided in this Agreement for Revolving Credit Loans
generally. Any Overadvance made pursuant to the terms hereof shall be
made by all Revolving Credit and Term Loan A Lenders ratably in
-2-
accordance with their respective Revolving Loan Percentages.
Overadvances in the aggregate amount of $1,500,000 or less may, unless
a Default or Event of Default has occurred and is continuing, be made
in the sole and absolute discretion of Agent. Overadvances in an
aggregate amount of more than $1,500,000 but less than $2,500,000 may,
unless a Default or an Event of Default has occurred and is continuing,
be made in the sole and absolute discretion of the Majority Lenders.
Overadvances in an aggregate amount of $2,500,000 or more and
Overadvances to be made after the occurrence and during the
continuation of a Default or an Event of Default shall require the
consent of all Lenders. The foregoing notwithstanding, in no event,
unless otherwise consented to by all Revolving Credit and Term Loan A
Lenders, (w) shall any Overadvances be outstanding for more than sixty
(60) consecutive days, (x) after all outstanding Overadvances have been
repaid, shall Agent or Revolving Credit and Term Loan A Lenders make
any additional Overadvances unless sixty (60) days or more have expired
since the last date on which any Overadvances were outstanding, (y)
shall Overadvances be outstanding on more than ninety (90) days within
any one hundred eighty day (180) period or (z) shall Agent make
Revolving Credit Loans on behalf of Revolving Credit and Term Loan A
Lenders under this subsection 1.1.2 to the extent such Revolving Credit
Loans would cause a Revolving Credit and Term Loan A Lender's share of
the Revolving Credit Loans to exceed such Revolving Credit and Term
Loan A Lender's Revolving Loan Commitment minus such Revolving Credit
and Term Loan A Lender's Revolving Loan Percentage of the LC Amount.
1.1.3. Use of Proceeds. The Revolving Credit Loans shall be used
---------------
solely (i) for the satisfaction of existing Indebtedness of Falcon,
(ii) for Borrowers' general operating capital needs in a manner
consistent with the provisions of this Agreement and all applicable
laws, and (iii) for other purposes permitted under this Agreement.
1.1.4. Agent Loans. Upon the occurrence and during the continuance
-----------
of an Event of Default, Agent, in its sole discretion, may make
Revolving Credit Loans on behalf of Revolving Credit and Term Loan A
Lenders, in an aggregate amount not to exceed $500,000, if Agent, in
its reasonable business judgment, deems that such Revolving Credit
Loans are necessary or desirable (i) to protect all or any portion of
the Collateral, (ii) to enhance the likelihood, or maximize the amount
of, repayment of the Loans and the other Obligations, or (iii) to pay
any other amount chargeable to any Borrower pursuant to this Agreement,
including without limitation costs, fees and expenses as described in
Sections 2.8 and 2.9 (hereinafter, "Agent Loans"); provided, that in no
--------
event shall (a) the maximum principal amount of the Revolving Credit
Loans exceed the aggregate Revolving Loan Commitments and (b) Majority
Lenders may at any time revoke Agent's authorization to make Agent
Loans. Any such revocation must be in writing and shall become
effective prospectively upon Agent's receipt thereof. Each Revolving
Credit and Term Loan A Lender shall be obligated to advance its
Revolving Loan Percentage of each Agent Loan. If Agent Loans are made
pursuant to the preceding sentence, then (a) the Borrowing Base shall
be deemed increased by the amount of such permitted Agent Loans, but
only for so long
-3-
as Agent allows such Agent Loans to be outstanding, and (b) all
Revolving Credit and Term Loan A Lenders that have committed to make
Revolving Credit Loans shall be bound to make, or permit to remain
outstanding, such Agent Loans based upon their Revolving Loan
Percentages in accordance with the terms of this Agreement.
1.2. Letters of Credit; LC Guaranties.
--------------------------------
1.2.1. Issuance of Letters of Credit and LC Guarantees. Agent agrees,
-----------------------------------------------
for so long as no Default or Event of Default exists and if requested
by a Borrower, to, as requested by a Borrower, (i) issue its, or cause
to be issued by Bank or another Affiliate of Agent, on the date
requested by a Borrower, Letters of Credit for the account of a
Borrower or (ii) execute LC Guaranties by which Agent, Bank, or another
Affiliate of Agent, on the date requested by a Borrower, shall guaranty
the payment or performance by such Borrower of its reimbursement
obligations with respect to letters of credit issued for a Borrower's
account by other Persons; provided that the LC Amount shall not exceed
--------
$7,500,000 at any time. No Letter of Credit or LC Guaranty may have an
expiration date after the last day of the Term.
1.2.2. Revolving Credit and Term Loan A Lender Participation.
-----------------------------------------------------
Immediately upon the issuance of a Letter of Credit or an LC Guaranty
under this Agreement, each Revolving Credit and Term Loan A Lender
shall be deemed to have irrevocably and unconditionally purchased and
received from Agent, without recourse or warranty, an undivided
interest and participation therein equal to the applicable LC
Obligations multiplied by such Revolving Credit and Term Loan A
---------- --
Lender's Revolving Loan Percentage. Agent will notify each Revolving
Credit and Term Loan A Lender on a weekly basis, or if determined by
Agent, a more frequent basis, upon presentation to it of a draw under a
Letter of Credit or a demand for payment under a LC Guaranty. On a
weekly basis, or more frequently if requested by Agent, each Revolving
Credit and Term Loan A Lender shall make payment to Agent in
immediately available funds, of an amount equal to such Revolving
Credit and Term Loan A Lender's pro rata share of the amount of any
payment made by Agent in respect to any Letter of Credit or LC
Guaranty. The obligation of each Revolving Credit and Term Loan A
Lender to reimburse Agent under this subsection 1.2.2 shall be
unconditional, continuing, irrevocable and absolute, except in respect
of indemnity claims arising out of Agent's willful misconduct. In the
event that any Revolving Credit and Term Loan A Lender fails to make
payment to Agent of any amount due under this subsection 1.2.2, Agent
shall be entitled to receive, retain and apply against such obligation
the principal and interest otherwise payable to such Revolving Credit
and Term Loan A Lender hereunder until Agent receives such payment from
such Revolving Credit and Term Loan A Lender or such obligation is
otherwise fully satisfied; provided, however, that nothing contained in
-------- -------
this sentence shall relieve such Revolving Credit and Term Loan A
Lender of its obligation to reimburse the Agent for such amount in
accordance with this subsection 1.2.2.
1.2.3. Reimbursement. Notwithstanding anything to the contrary
-------------
contained herein, Borrowers, Agent and Revolving Credit and Term Loan A
Lenders hereby
-4-
agree that all LC Obligations and all obligations of each Borrower
relating thereto shall be satisfied by the prompt issuance of one or
more Revolving Credit Loans that are Base Rate Portions, which
Borrowers hereby acknowledge are requested and Revolving Credit and
Term Loan A Lenders hereby agree to fund. In the event that Revolving
Credit Loans are not, for any reason, promptly made to satisfy all then
existing LC Obligations, each Revolving Credit and Term Loan A Lender
hereby agrees to pay to Agent, on demand, an amount equal to such LC
Obligations multiplied by such Lender's Revolving Loan Percentage, and
---------- --
until so paid, such amount shall be secured by the Collateral and shall
bear interest and be payable at the same rate and in the same manner as
Base Rate Portions. In no event shall Agent or any Revolving Credit and
Term Loan A Lender make any Revolving Credit Loan in respect of any
Obligation that has already been satisfied by any Borrower.
1.3. Term Loans.
----------
1.3.1. Term Loan A. Each Revolving Credit and Term Loan A Lender,
-----------
severally and not jointly, agrees to make a term loan (collectively,
the "Term Loan A") to Borrowers on the Closing Date, in the aggregate
principal amount of such Revolving Credit and Term Loan A Lender's Term
Loan A Commitment, which shall be repayable in accordance with the
terms of the Term A Notes and shall be secured by all of the
Collateral. The aggregate amount of the Term Loan A Commitments is
$6,231,000. The proceeds of the Term Loan A shall be used solely for
the purposes for which the proceeds of the Revolving Credit Loans are
authorized to be used.
1.3.2. Term Loan B. Each Term Loan B Lender, severally and not jointly,
-----------
agrees to make a term loan (collectively, the "Term Loan B") to
Borrowers on the Closing Date, in the aggregate principal amount of
such Term Loan B Lender's Term Loan B Commitment, which shall be
repayable in accordance with the terms of the Term B Notes and shall be
secured by all of the Collateral. The aggregate amount of the Term Loan
B Commitments is $35,000,000. The proceeds of Term Loan B shall be used
solely for the purposes for which proceeds of the Revolving Credit
Loans are authorized to be used.
1.4. Borrowing Agent.
---------------
For ease of administration of this Agreement, each Borrower other
than Falcon hereby appoints Falcon as the borrowing agent for all Borrowers
hereunder. In such capacity, Falcon will request all Revolving Credit
Loans to be made pursuant to Section 1.1, will request all Letters of
Credit and LC Guaranties to be issued pursuant to Section 1.2 and will
submit all LIBOR Requests with respect to obtaining any LIBOR Portion
pursuant to subsection 3.1.7, converting any Base Rate Portion into a LIBOR
Portion pursuant to subsection 3.1.8 or continuing any LIBOR Portion into a
subsequent Interest Period pursuant to subsection 3.1.9, in each case
pursuant to the procedures set forth in Section 3.1. Notwithstanding
anything to the contrary contained in this Agreement, no Borrower other than
Falcon shall be entitled to request
-5-
any Revolving Credit Loans, Letters of Credit or LC Guaranties or to submit
any LIBOR Requests hereunder.
SECTION 2. INTEREST, FEES AND CHARGES
2.1. Interest.
--------
2.1.1. Rates of Interest.
-----------------
(a) Interest shall accrue on the principal amount of the Base
Rate Revolving Portions and the Base Rate Term A Portions outstanding
at the end of each day at a fluctuating rate per annum equal to the
Applicable Margin then in effect plus the Base Rate. Said rate of
----
interest shall increase or decrease by an amount equal to any increase
or decrease in the Base Rate, effective as of the opening of business
on the day that any such change in the Base Rate occurs. If a Borrower
exercises its LIBOR Option as provided in Section 3.1, interest shall
accrue on the principal amount of the LIBOR Revolving Portions and the
LIBOR Term A Portions outstanding at the end of each day at a rate per
annum equal to the Applicable Margin then in effect plus the LIBOR
----
applicable to each LIBOR Portion for the corresponding Interest Period.
(b) Interest shall accrue on the principal amount of Term
Loan B outstanding at the end of each day at a rate per annum equal to
16.5%, and shall be payable as follows: a portion of such interest
equal to 12% per annum (the "Term Loan B Current Pay Interest") shall
be paid on a current basis as provided in subsection 3.2.2(iii) and the
balance of such interest equal to 4.5% per annum (the "Term Loan B PIK
Interest") shall be added to the outstanding principal balance of Term
Loan B on the first day of each month hereafter commencing on June 1,
2003 and shall be paid as provided in subsection 3.2.2. Notwithstanding
the foregoing, if within forty-five (45) days after the Closing Date,
Borrowers have not satisfied the agreements described in subsection
8.1.11, and until such time as such agreements have been satisfied,
total interest accruing on the principal amount of Term Loan B shall
increase to 17.5% per annum and the Term Loan B Current Pay Interest
shall increase to 13% per annum.
2.1.2. Default Rate of Interest. At the option of Agent or Majority
------------------------
Lenders, upon and after the occurrence of an Event of Default, and
during the continuation thereof, the principal amount of all Revolving
Credit and Term Loan A Loans shall bear interest at a rate per annum
equal to 2.0% plus the interest rate otherwise applicable thereto (the
----
"Tranche A Default Rate"). At the option of the Tranche B Agent or
Majority Term Loan B Lenders, upon and after the occurrence of an Event
of Default, and during the continuation thereof, the principal amount
of Term Loan B shall bear interest at a rate per annum equal to 4% plus
----
the interest rate otherwise applicable thereto (the "Tranche B Default
Rate"), and, thereupon (during the continuation of such Event of
Default), the Term Loan B Current Pay Interest shall increase to 16%
per annum.
-6-
2.1.3. Maximum Interest. In no event whatsoever shall the aggregate
----------------
of all amounts deemed interest hereunder or under the Notes and charged
or collected pursuant to the terms of this Agreement or pursuant to the
Notes exceed the highest rate permissible under any law which a court
of competent jurisdiction shall, in a final determination, deem
applicable hereto. If any provisions of this Agreement or the Notes are
in contravention of any such law, such provisions shall be deemed
amended to conform thereto (the "Maximum Rate"). If at any time, the
amount of interest paid hereunder is limited by the Maximum Rate, and
the amount at which interest accrues hereunder is subsequently below
the Maximum Rate, the rate at which interest accrues hereunder shall
remain at the Maximum Rate, until such time as the aggregate interest
paid hereunder equals the amount of interest that would have been paid
had the Maximum Rate not applied.
2.2. Computation of Interest and Fees.
--------------------------------
Interest, Letter of Credit and LC Guaranty fees and Unused
Line Fees hereunder shall be calculated daily and shall be computed on the
actual number of days elapsed over a year of three hundred sixty (360) days.
2.3. Fee Letter.
----------
Borrowers shall jointly and severally pay to Agent, certain fees
and other amounts in accordance with the terms of the fee letter of even date
herewith among Borrowers and Agent (the "Fee Letter").
2.4. Letter of Credit and LC Guaranty Fees.
-------------------------------------
Borrowers shall jointly and severally pay to Agent:
(a) for standby Letters of Credit and LC Guaranties of standby
letters of credit, for the ratable benefit of Revolving Credit and Term
Loan A Lenders, a per annum fee equal to the Applicable Margin then in
effect for LIBOR Revolving Portions of the aggregate undrawn face
amount of such Letters of Credit and LC Guaranties outstanding from
time to time during the term of this Agreement, plus all normal and
----
customary charges associated with the issuance thereof, which fees and
charges shall be deemed fully earned upon issuance of each such Letter
of Credit or LC Guaranty, shall be due and payable in arrears on the
first Business Day of each month and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason;
(b) for documentary Letters of Credit and LC Guaranties of
documentary letters of credit a fee, for the account of Agent only, in
accordance with Agent's documentary letter of credit fee schedule then
in effect plus all normal and customary charges associated with the
----
issuance and administration of each such Letter of Credit or LC
Guaranty (which fees and charges shall be fully earned upon issuance,
renewal or extension (as the case may be) of each such Letter of Credit
or
-7-
LC Guaranty, shall be due and payable in arrears on the first Business
Day of each month, and shall not be subject to rebate or proration upon
the termination of this Agreement for any reason); and
(c) with respect to all Letters of Credit and LC Guaranties,
for the account of Agent only, a per annum fronting fee equal to 0.25%
of the aggregate undrawn amount of such Letters of Credit and LC
Guaranties outstanding from time to time during the term of this
Agreement, which fronting fees shall be due and payable monthly in
arrears on the first Business Day of each month and shall not be
subject to rebate or proration upon the termination of this Agreement
for any reason.
2.5. Unused Line Fee.
---------------
Borrowers shall jointly and severally pay to Agent, for the ratable
benefit of Revolving Credit and Term Loan A Lenders, a fee (the "Unused Line
Fee") equal to 0.50% per annum multiplied by the average daily amount by which
the Revolving Credit Maximum Amount exceeds the sum of (i) the outstanding
principal balance of the Revolving Credit Loans plus (ii) the LC Amount plus
---- ----
(iii) the amount of the Special Reserve. The Unused Line Fee shall be payable
monthly in arrears on the first day of each month hereafter.
2.6. Prepayment Fee.
--------------
(a) At the effective date of termination of this Agreement for
any reason, any prepayment of Term Loan A pursuant to subsection 3.3.5
or any reduction of the Revolving Loan Commitments pursuant to
subsection 3.3.6, Borrowers shall jointly and severally pay to Agent,
for the ratable benefit of Revolving Credit and Term Loan A Lenders (in
addition to the then outstanding principal, accrued interest and other
charges then due and owing under the terms of this Agreement and any of
the other Loan Documents and any amounts then due and owing pursuant to
subsection 3.2.5), as liquidated damages for the loss of the bargain
and not as a penalty, an amount equal to (i) 1% of the sum of the
aggregate amount of the Revolving Loan Commitments then being reduced
or terminated and the outstanding amount of Term Loan A then being
prepaid, if such termination, prepayment or reduction occurs during the
first 12-month period of the Term (June 3, 2003 through June 2, 2004)
and (ii) 0.50% of the sum of the aggregate amount of the Revolving Loan
Commitments then being reduced or terminated and the outstanding amount
of Term Loan A then being prepaid, if such termination, prepayment or
reduction occurs during the second 12-month period of the Term (June 3,
2004 through June 2, 2005). If such termination, prepayment or
reduction occurs on or after June 3, 2005, no prepayment fee shall be
payable for the benefit of the Revolving Credit and Term Loan A
Lenders.
(b) Upon any prepayment of the Term Loan B (other than a
mandatory prepayment pursuant to subsection 3.3.2 of the Agreement) or
upon the effective date of termination of this Agreement for any
reason, Borrowers shall pay to Tranche B Agent, for the ratable benefit
of the Term Loan B Lenders, as liquidated
-8-
damages for the loss of the bargain and not as a penalty, an amount
equal to the Term Loan B Prepayment Fee applicable at such time.
2.7. Audit Fees.
----------
Borrowers shall jointly and severally pay to Agent audit
fees in accordance with Agent's current schedule of fees in effect from time
to time in connection with audits of the books and records and Properties of
each Borrower and its Subsidiaries and such other matters as Agent shall
deem appropriate in its reasonable credit judgment, plus all reasonable
out-of-pocket expenses incurred by Agent in connection with such audits;
provided, that so long as no Event of Default has occurred and is
--------
continuing, Borrowers shall not be liable for such audit fees incurred in
connection with more than four (4) such audits during any fiscal year or in
excess of $100,000 in any fiscal year, whether such audits are conducted by
employees of Agent or by third parties hired by Agent. Such audit fees and
out-of-pocket expenses shall be payable on the first Business Day of the
month following the date of issuance by Agent of a request for payment
thereof to Falcon. Agent may, in its discretion, provide for the payment of
such amounts by making appropriate Revolving Credit Loans to Borrowers and
charging the applicable Loan Account therefor.
2.8. Reimbursement of Expenses.
-------------------------
If, at any time or times regardless of whether or not an Event
of Default then exists, (a) Agent or Tranche B Agent incurs legal or
accounting expenses or any other out-of-pocket costs or expenses in
connection with (i) the negotiation and preparation of this Agreement or any
of the other Loan Documents, any amendment of or modification of this
Agreement or any of the other Loan Documents, or any syndication or
attempted syndication of the Obligations (including, without limitation,
printing and distribution of materials to prospective Lenders and all costs
associated with bank meetings, but excluding any closing fees paid to
Lenders in connection therewith) or (ii) the administration of this
Agreement or any of the other Loan Documents and the transactions
contemplated hereby and thereby; or (b) Agent or any Lender incurs legal or
accounting expenses or any other out-of-pocket costs or expenses in
connection with (i) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Agent, any Lender, any Borrower or any other
Person) relating to the Collateral, this Agreement or any of the other Loan
Documents or any Borrower's, any of its Subsidiaries' or any Guarantor's
affairs; (ii) during the continuance of an Event of Default, any amendment
or modification of this Agreement or any of the other Loan Documents or the
administration of this Agreement or any of the other Loan Documents and the
transactions contemplated hereby and thereby; (iii) during the continuance
of an Event of Default, any attempt to enforce any rights of Agent or any
Lender against any Borrower or any other Person which may be obligated to
Agent or any Lender by virtue of this Agreement or any of the other Loan
Documents, including, without limitation, the Account Debtors; or
(iv) during the continuance of an Event of Default, any attempt to inspect,
verify, protect, preserve, restore, collect, sell, liquidate or otherwise
dispose of or realize upon the Collateral; then all such legal and
accounting expenses, other out-of-pocket costs and expenses of Agent or any
Lender, as applicable, shall be charged to Borrowers on a joint and several
basis; provided, that no Borrower shall be responsible for such legal or
--------
accounting expenses and other out-of-pocket
-9-
costs or expenses to the extent incurred because of the gross negligence or
willful misconduct of Agent or any Lender. For purposes of this Section 2.8,
each Term Loan B Lender, each of its Affiliates that is a Term Loan B
Lender, and each fund and account managed by such Term Loan B Lender or one
of its Affiliates, in each case that is a Term Loan B Lender hereunder,
shall be permitted to obtain reimbursement for the costs and expenses of one
counsel among them. All amounts chargeable to Borrowers under this Section
2.8 shall be Obligations secured by all of the Collateral, shall be payable
on demand to Agent or such Lender, as the case may be, and shall bear
interest from the date such demand is made until paid in full at the rate
applicable to Base Rate Portions from time to time. Borrowers shall also
jointly and severally reimburse Agent for expenses incurred by Agent in its
administration of the Collateral to the extent and in the manner provided in
Sections 2.9 and 2.10 hereof.
2.9. Bank Charges.
------------
Borrowers shall jointly and severally pay to Agent, on demand, for
the account of Agent or any applicable Lender, any and all fees, costs or
expenses which Agent or such Lender pays to a bank or other similar
institution arising out of or in connection with (i) the forwarding to any
Borrower or any other Person on behalf of any Borrower, by Agent or such
Lender, of proceeds of Loans made to any Borrower pursuant to this Agreement
and (ii) the depositing for collection by Agent or such Lender of any check
or item of payment received or delivered to Agent or such Lender on account
of the Obligations.
2.10. Collateral Protection Expenses; Appraisals.
------------------------------------------
All out-of-pocket expenses incurred in protecting, storing,
warehousing, insuring, handling, maintaining and shipping the Collateral,
and any and all excise, property, sales, and use taxes imposed by any state,
federal, or local authority on any of the Collateral or in respect of the
sale thereof shall be jointly and severally borne and paid by Borrowers. If
Borrowers fail to promptly pay any portion thereof when due, Agent may, at
its option, but shall not be required to, pay the same and charge one or
more Borrowers therefor. Agent may, at Borrowers' joint and several expense,
obtain appraisals from appraisers (who may be personnel of Agent), stating
the then current fair market value of all or any portion of the real
Property or personal Property of any Borrower or any of its Domestic
Subsidiaries (other than Inventory), which appraisals may be obtained (a) at
any time that an Event of Default is in existence, provided, that if Agent
does not obtain any such appraisal after request therefor by Tranche B
Agent, Tranche B Agent shall be entitled to obtain such appraisal hereunder
(at Borrowers' joint and several expense) and (b) at any time that Agent,
Tranche B Agent or any Lender determines that obtaining appraisals is
necessary in order for it to comply with applicable laws or regulations.
Additionally, Agent may, at Borrowers' joint and several expense, obtain
appraisals from appraisers (who may be personnel of Agent), stating the then
current fair market value of all or any portion of the Inventory of any
Borrower or any of its Domestic Subsidiaries, which appraisals may be
obtained (a) once in each calendar year, at Agent's determination, (b) at
any time (but no more often than once in each ninety (90) day period), that
an Event of Default is in existence, provided, that if Agent does not obtain
any such appraisal after request therefor by Tranche B Agent, Tranche B
Agent shall be entitled to obtain any such appraisal hereunder (at
Borrowers' joint and several expense) and (c) at any time that Agent,
Tranche B
-10-
Agent or any Lender reasonably determines that obtaining such appraisal is
necessary in order for it to comply with applicable laws or regulations.
2.11. Payment of Charges.
------------------
All amounts chargeable to any Borrower under this Agreement shall
be Obligations secured by all of the Collateral, shall be, unless
specifically otherwise provided, payable on demand and shall bear interest
from the date demand was made or such amount is due, as applicable, until
paid in full at the rate applicable to Base Rate Revolving Portions from
time to time.
2.12. Term Loan B Fee Letter.
----------------------
Borrowers shall jointly and severally pay to Tranche B Agent certain
fees in accordance with the terms of the fee letter of even date herewith
among Borrowers and Tranche B Agent (the "Term Loan B Fee Letter").
2.13. No Deductions.
-------------
Any and all payments or reimbursements made hereunder shall be made
free and clear of and without deduction for any and all taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto; excluding, however, the following: taxes imposed on the
income (including gross receipts taxes, income taxes, franchise taxes,
branch profits taxes and similar taxes) of Agent or any Lender by the
jurisdiction under the laws of which Agent or any Lender is organized or
doing business or engaged in business, or any political subdivision thereof
and taxes imposed on its income by the jurisdiction of Agent's or such
Lender's applicable lending office or any political subdivision thereof (all
such non-excluded taxes, levies, imposts, deductions, charges or
withholdings and all liabilities with respect thereto, herein "Tax
Liabilities"). If any Borrower shall be required by law to deduct any such
Tax Liabilities from or in respect of any sum payable hereunder to Agent or
any Lender, then the sum payable hereunder shall be increased as may be
necessary so that, after all required deductions are made, Agent or such
Lender receives an amount equal to the sum it would have received had no
such deductions been made; provided, however, that no Borrower shall be
-------- -------
required under this Section 2.13 to increase any sum payable to Agent or any
Lender that is organized under the laws of any jurisdiction other than the
United States or any state thereof (and shall be allowed to withhold,
without gross-up, any Tax Liabilities from or in respect of any sum payable
thereunder to Agent or such Lender) to the extent Agent or such Lender fails
to establish a complete exemption from United States federal withholding tax
on all interest payments hereunder.
2.14. Joint and Several Obligations.
-----------------------------
Each Borrower acknowledges that it is jointly and severally liable
for all of the Obligations and as a result hereby unconditionally guaranties
the full and prompt payment when due, whether at maturity or earlier, by
reason of acceleration or otherwise, and at all times thereafter, of all
Obligations of every kind and nature of each other Borrower to Agent and
-11-
Lenders and, howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, joint or several, now or hereafter
existing, or due or to become due, and howsoever owned, held or acquired by
Agent or any Lender. Each Borrower agrees that if this guaranty, or any
Liens securing this guaranty, would, but for the application of this
sentence, be unenforceable under applicable law, this guaranty and each such
Lien shall be valid and enforceable to the maximum extent that would not
cause this guaranty or such Lien to be unenforceable under applicable law,
and this guaranty shall automatically be deemed to have been amended
accordingly at all relevant times.
Each Borrower hereby agrees that its obligations under this guaranty
shall be unconditional, irrespective of (a) the validity or enforceability
of the Obligations or any part thereof, or of any promissory note or other
document evidencing all or any part of the Obligations, (b) the absence of
any attempt to collect the Obligations from any other Borrower or any
Guarantor or other action to enforce the same, (c) the waiver or consent by
Agent or any Lender with respect to any provision of any agreement,
instrument or document evidencing or securing all or any part of the
Obligations, or any other agreement, instrument or document now or hereafter
executed by any other Borrower and delivered to Agent or any Lender (other
than a waiver, forgiveness or consent by Agent and Lenders that reduces the
amount of any of the Obligations), (d) the failure by Agent or any Lender to
take any steps to perfect and maintain its security interest in, or to
preserve its rights to, any security or Collateral for the Obligations, for
its benefit, (e) Agent's or any Lender's election, in any proceeding
instituted under the United States Bankruptcy Code or any other similar
bankruptcy or insolvency legislation, of the application of Section
1111(b)(2) of the United States Bankruptcy Code or any other similar
bankruptcy or insolvency legislation, (f) any borrowing or grant of a
security interest by any Borrower as debtor-in-possession, under Section 364
of the United States Bankruptcy Code or any other similar bankruptcy or
insolvency legislation, (g) the disallowance, under ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy Code or any other similar bankruptcy or insolvency
legislation, of all or any portion of Agent's or any Lender's claim(s) for
repayment of the Obligations or (h) any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a borrower
or a guarantor.
Each Borrower hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of receivership or bankruptcy of
any other Borrower, protest or notice with respect to the Obligations owed
by any other Borrower and all demands whatsoever with respect thereto, and
covenants that this guaranty will not be discharged, except by complete and
irrevocable payment and performance of the Obligations. No notice to any
Borrower or any other party shall be required for Agent or any Lender to
make demand hereunder. Such demand shall constitute a mature and liquidated
claim against the applicable Borrower. During the existence of any Event of
Default, Agent and Lenders may, at their election, proceed directly and at
once, without notice, against all or any of the Borrowers to collect and
recover the full amount or any portion of the Obligations, without first
proceeding against any other Borrower or any other Person, or any security
or collateral for the Obligations. During the existence of an Event of
Default, Agent and each Lender shall have the exclusive right to determine
the application of payments and credits, if any from any Borrower, any other
-12-
Person or any security or collateral for the Obligations, on account of the
Obligations or of any other liability of any Borrower to Agent or any
Lender.
Each Borrower hereby waives notice of acceptance of its joint and
several liability, notice of any and all Loans made under this Agreement,
notice of occurrence of any Event of Default, or of any demand for any
payment of any Obligations owed by any other Borrower under this Agreement,
notice of any action at any time taken or omitted by Agent, Tranche B Agent
or any Lender under or in respect of any of the Obligations, any requirement
of diligence and, generally, all formalities of every kind in connection
with this Agreement. Each Borrower hereby assents to, and waives notice of,
any extension or postponement of the time for the payment of any of the
Obligations hereunder, the acceptance of any partial payment thereon, any
waiver, consent or other action or acquiescence by Agent, Tranche B Agent or
any Lender at any time or times in respect of any default by any Borrower in
the performance or satisfaction of any term, covenant, condition or
provision of this Agreement, any and all other indulgences whatsoever by
Agent, Tranche B Agent or any Lender in respect of any of the Obligations
hereunder, and the taking, addition, substitution or release, in whole or in
part, at any time or times, of any security for any of such Obligations or
the addition, substitution or release, in whole or in part, of any Borrower.
Without limiting the generality of the foregoing, each Borrower assents to
any other action or delay in acting or failure to act on the part of Agent,
Tranche B Agent or any Lender, including, without limitation, any failure
strictly or diligently to assert any right or to pursue any remedy or to
comply fully with applicable laws or regulations thereunder which might, but
for the provisions of this Section 2.14, afford grounds for terminating,
discharging or releasing such Borrower, in whole or in part, from any of its
obligations under this Section 2.14, it being the intention of each Borrower
that, so long as any of the Obligations hereunder remain unsatisfied, the
obligations of such Borrower under this Section 2.14 shall not be discharged
except by performance and then only to the extent of such performance. Each
Borrower hereby waives all suretyship and similar defenses to its absolute
and unconditional liability on the Obligations. The obligations of each
Borrower under this Section 2.14 shall not be diminished or rendered
unenforceable by any winding up, reorganization, arrangement, liquidation,
reconstruction or similar proceeding with respect to any Borrower, Agent,
Tranche B Agent or any Lender. The joint and several liability of the
Borrowers hereunder shall continue in full force and effect notwithstanding
any absorption, merger, amalgamation or any other change whatsoever in the
name, membership, constitution or place of formation of any Borrower, Agent,
Tranche B Agent or any Lender.
Notwithstanding anything to the contrary set forth in this Section
2.14, it is the intent of the parties hereto that the liability incurred by
each Borrower in respect of the Obligations of the other Borrowers (and any
Lien granted by each Borrower to secure such Obligations), not constitute a
fraudulent conveyance under Section 548 of the United States Bankruptcy Code
or a fraudulent conveyance or fraudulent transfer under the provisions of
any applicable law of any state or other governmental unit ("Fraudulent
Conveyance"). Consequently, each Borrower, Agent and each Lender hereby
agree that if a court of competent jurisdiction determines that the
incurrence of liability by any Borrower in respect of the Obligations of any
other Borrower (or any Liens granted by such Borrower to secure such
Obligations) would, but for the application of this sentence, constitute a
Fraudulent
-13-
Conveyance, such liability (and such Liens) shall be valid and enforceable
only to the maximum extent that would not cause the same to constitute a
Fraudulent Conveyance, and this Agreement and the other Loan Documents shall
automatically be deemed to have been amended accordingly.
SECTION 3. LOAN ADMINISTRATION.
3.1. Manner of Borrowing Revolving Credit Loans/LIBOR Option.
-------------------------------------------------------
Borrowings under the credit facility established pursuant to Section 1
hereof shall be as follows:
3.1.1. Loan Requests. A request for a Revolving Credit Loan shall be
-------------
made, or shall be deemed to be made, in the following manner: (a) a
Borrower may give Agent notice of its intention to borrow, in which
notice such Borrower shall specify the amount of the proposed borrowing
of a Revolving Credit Loan and the proposed borrowing date, which shall
be a Business Day, no later than 11:00 a.m. (Chicago, Illinois time) on
the proposed borrowing date (or in accordance with subsection 3.1.7,
3.1.8 or 3.1.9, as applicable, in the case of a request for a LIBOR
Revolving Portion), provided, however, that no such request may be made
-------- -------
at a time when there exists a Default or an Event of Default; and
(b) the becoming due of any amount required to be paid under this
Agreement, or the Notes, whether as interest or for any other
Obligation, shall be deemed irrevocably to be a request by a Borrower
for a Revolving Credit Loan on the due date in the amount required to
pay such interest or other Obligation.
3.1.2. Disbursement. Each Borrower hereby irrevocably authorizes Agent
------------
to disburse the proceeds of each Loan requested, or deemed to be
requested, pursuant to subsection 3.1.1 as follows: (i) the proceeds of
each Revolving Credit Loan requested under subsection 3.1.1(a) shall be
disbursed by Agent in lawful money of the United States of America in
immediately available funds, in the case of the initial borrowing, in
accordance with the terms of the written disbursement letter from
Borrowers, and in the case of each subsequent borrowing, by wire
transfer to such bank account as may be agreed upon by Borrowers and
Agent from time to time or elsewhere if pursuant to a written direction
from a Borrower and (ii) the proceeds of each Revolving Credit Loan
deemed requested under subsection 3.1.1(b) shall be disbursed by Agent
by way of direct payment of the relevant interest or other Obligation.
If at any time any Loan is funded by Agent or Revolving Credit and Term
Loan A Lenders in excess of the amount requested or deemed requested by
Borrowers, Borrowers jointly and severally agree to repay the excess to
Agent immediately upon the earlier to occur of (a) Borrowers' discovery
of the error and (b) notice thereof to Borrowers from Agent or any
Revolving Credit and Term Loan A Lender.
3.1.3. Payment by Revolving Credit and Term Loan A Lenders. Agent
---------------------------------------------------
shall give to each Revolving Credit and Term Loan A Lender prompt
written notice by facsimile, telex or cable of the receipt by Agent
from Borrowers of any request for a
-14-
Revolving Credit Loan. Each such notice shall specify the requested
date and amount of such Revolving Credit Loan, whether such Revolving
Credit Loan shall be subject to the LIBOR Option, and the amount of
each Revolving Credit and Term Loan A Lender's advance thereunder (in
accordance with its applicable Revolving Loan Percentage). Each
Revolving Credit and Term Loan A Lender shall, not later than 12:00
p.m. (Chicago time) on such requested date, wire to a bank designated
by Agent the amount of that Revolving Credit and Term Loan A Lender's
Revolving Loan Percentage of the requested Revolving Credit Loan. The
failure of any Revolving Credit and Term Loan A Lender to make the
Revolving Credit Loans to be made by it shall not release any other
Revolving Credit and Term Loan A Lender of its obligations hereunder to
make its Revolving Credit Loan. Neither Agent nor any other Revolving
Credit and Term Loan A Lender shall be responsible for the failure of
any other Revolving Credit and Term Loan A Lender to make the Revolving
Credit Loan to be made by such other Revolving Credit and Term Loan A
Lender. The foregoing notwithstanding, Agent, in its sole discretion,
may from its own funds make a Revolving Credit Loan on behalf of any
Revolving Credit and Term Loan A Lender. In such event, the Revolving
Credit and Term Loan A Lender on behalf of whom Agent made the
Revolving Credit Loan shall reimburse Agent for the amount of such
Revolving Credit Loan made on its behalf, on a weekly (or more
frequent, as determined by Agent in its sole discretion) basis. On each
such settlement date, Agent will pay to each Revolving Credit and Term
Loan A Lender the net amount owing to such Revolving Credit and Term
Loan A Lender in connection with such settlement, including without
limitation amounts relating to Loans, fees, interest and other amounts
payable hereunder. The entire amount of interest attributable to such
Revolving Credit Loan for the period from the date on which such
Revolving Credit Loan was made by Agent on such Revolving Credit and
Term Loan A Lender's behalf until Agent is reimbursed by such Revolving
Credit and Term Loan A Lender, shall be paid to Agent for its own
account.
3.1.4. Authorization. Each Borrower hereby irrevocably authorizes
-------------
Agent, in Agent's sole discretion, to advance to Falcon or another
Borrower, and to charge to the applicable Borrower's Loan Account
hereunder as a Revolving Credit Loan (which shall be a Base Rate
Portion), a sum sufficient to pay all interest accrued on the
Obligations during the immediately preceding month, to pay all
principal due and payable at any time and to pay all fees, costs and
expenses and other Obligations at any time owed by each Borrower to
Agent or any Lender hereunder.
3.1.5. Letter of Credit and LC Guaranty Requests. A request for a
-----------------------------------------
Letter of Credit or LC Guaranty shall be made in the following manner:
a Borrower may give Agent and Bank a written notice of its request for
the issuance of a Letter of Credit or LC Guaranty, not later than 11:00
a.m. (Chicago, Illinois time), one Business Day before the proposed
issuance date thereof, in which notice Borrowers shall specify the
proposed issuer, issuance date and format and wording for the Letter of
Credit or LC Guaranty being requested (which shall be satisfactory to
Agent and the Person being asked to issue such Letter of Credit or LC
Guaranty); provided, that no such request
--------
-15-
may be made at a time when there exists a Default or Event of Default.
Such request shall be accompanied by an executed application and
reimbursement agreement in form and substance reasonably satisfactory
to Agent and the Person being asked to issue the Letter of Credit or LC
Guaranty, as well as any required corporate resolutions or other
documents reasonably requested by Agent. In the event of any
inconsistency or conflict between any such application and
reimbursement agreement between a Borrower and Bank, and this
Agreement, the terms and provisions of this Agreement shall govern and
control.
3.1.6. Method of Making Requests. As an accommodation to Borrowers,
-------------------------
unless a Default or an Event of Default is then in existence, (i) Agent
shall permit telephonic or electronic requests for Revolving Credit
Loans to Agent, (ii) Agent and Bank may, in their discretion, permit
electronic transmittal of requests for Letters of Credit and LC
Guaranties to them, and (iii) Agent may, in Agent's discretion, permit
electronic transmittal of instructions, authorizations, agreements or
reports to Agent. Unless a Borrower specifically directs Agent or Bank
in writing not to accept or act upon telephonic or electronic
communications from such Borrower, neither Agent nor Bank shall have
any liability to any Borrower for any loss or damage suffered by any
Borrower as a result of Agent's or Bank's honoring, in good faith, of
any requests, execution of any instructions, authorizations or
agreements or reliance on any reports communicated to it telephonically
or electronically and purporting to have been sent to Agent or Bank by
any Borrower, and neither Agent nor Bank shall have any duty to verify
the origin of any such communication or the authority of the Person
sending it. Each telephonic request for a Letter of Credit or LC
Guaranty accepted by Agent and Bank hereunder shall be promptly
followed by a written confirmation of such request from the applicable
Borrower to Agent and Bank.
3.1.7. LIBOR Portions. Provided that as of both the date of the LIBOR
--------------
Request and the first day of the Interest Period, no Default or Event
of Default exists, in the event any Borrower desires to obtain a LIBOR
Portion, such Borrower shall give Agent a LIBOR Request no later than
11:00 a.m. (Chicago, Illinois time) on the third Business Day prior to
the requested borrowing date. Each LIBOR Request shall be irrevocable
and binding on Borrowers. In no event shall Borrowers be permitted to
have outstanding at any one time LIBOR Portions with more than six (6)
different Interest Periods.
3.1.8. Conversion of Base Rate Portions. Provided that as of both
--------------------------------
the date of the LIBOR Request and the first day of the Interest Period,
no Default or Event of Default exists, a Borrower may, on any Business
Day, convert any Base Rate Portion into a LIBOR Portion. If a Borrower
desires to convert a Base Rate Portion, a Borrower shall give Agent a
LIBOR Request no later then 11:00 a.m. (Chicago, Illinois time) on the
third Business Day prior to the requested conversion date. After giving
effect to any conversion of Base Rate Portions to LIBOR Portions,
Borrowers shall not be permitted to have outstanding at any one time
LIBOR Portions with more than six (6) different Interest Periods.
-16-
3.1.9. Continuation of LIBOR Portions. Provided that as of both the
------------------------------
date of the LIBOR Request and the first day of the Interest Period, no
Default or Event of Default exists, a Borrower may, on any Business
Day, continue any LIBOR Portions into a subsequent Interest Period of
the same or a different permitted duration. If a Borrower desires to
continue a LIBOR Portion, such Borrower shall give Agent a LIBOR
Request no later than 11:00 a.m. (Chicago, Illinois time) on the second
Business Day prior to the requested continuation date. After giving
effect to any continuation of LIBOR Portions, Borrowers shall not be
permitted to have outstanding at any one time LIBOR Portions with more
than six (6) different Interest Periods. If a Borrower shall fail to
give timely notice of its election to continue any LIBOR Portion or
portion thereof as provided above, or if such continuation shall not be
permitted, such LIBOR Portion or portion thereof, unless such LIBOR
Portion shall be repaid, shall automatically be converted into a Base
Rate Portion at the end of the Interest Period then in effect with
respect to such LIBOR Portion.
3.1.10. Inability to Make LIBOR Portions. Notwithstanding any other
--------------------------------
provision hereof, if any applicable law, treaty, regulation or
directive, or any change therein or in the interpretation or
application thereof, shall make it unlawful for any Revolving Credit
and Term Loan A Lender (for purposes of this subsection 3.1.10, the
term "Revolving Credit and Term Loan A Lender" shall include the
office or branch where such Revolving Credit and Term Loan A Lender or
any corporation or bank then controlling such Revolving Credit and Term
Loan A Lender makes or maintains any LIBOR Portions) to make or
maintain its LIBOR Portions, or if with respect to any Interest Period,
Agent is unable to determine the LIBOR relating thereto, or adverse or
unusual conditions in, or changes in applicable law relating to, the
London interbank market make it, in the reasonable judgment of Agent,
impracticable to fund therein any of the LIBOR Portions, or make the
projected LIBOR unreflective of the actual costs of funds therefor to
any Revolving Credit and Term Loan A Lender, the obligation of Agent
and Revolving Credit and Term Loan A Lenders to make or continue LIBOR
Portions or convert Base Rate Portions to LIBOR Portions hereunder
shall forthwith be suspended during the pendency of such circumstances
and the applicable Borrower shall, if any affected LIBOR Portions are
then outstanding, promptly upon request from Agent, convert such
affected LIBOR Portions into Base Rate Portions. Agent shall promptly
notify Borrowers in writing if and when the circumstances giving rise
to such suspension no longer apply.
3.2. Payments.
--------
Except where evidenced by notes or other instruments issued or made
by one or more Borrowers to any Lender and accepted by such Lender
specifically containing payment instructions that are in conflict with this
Section 3.2 (in which case the conflicting provisions of said notes or other
instruments shall govern and control), the Obligations shall be payable as
follows:
-17-
3.2.1. Principal.
---------
(a) Revolving Credit Loans. Principal on account of Revolving
----------------------
Credit Loans shall be jointly and severally payable by Borrowers to
Agent for the ratable benefit of Revolving Credit and Term Loan A
Lenders immediately upon the earliest of (i) the receipt by Agent or
any Borrower of any proceeds of any of the Collateral (except as
otherwise provided herein), including without limitation pursuant to
subsections 3.3.1, 3.3.2, 3.3.3, 3.4.2 and 6.2.4, to the extent of said
proceeds, subject to Borrowers' rights to reborrow such amounts in
compliance with subsection 1.1.1 hereof; (ii) the occurrence of an
Event of Default in consequence of which Agent, Majority Lenders or
Majority Term Loan B Lenders (to the extent permitted under Section
10.2), elect to accelerate the maturity and payment of the Obligations,
or (iii) termination of this Agreement pursuant to Section 4 hereof;
provided, however, that, if an Overadvance shall exist at any time,
-------- -------
Borrowers shall, on demand, jointly and severally repay the
Overadvance. Each payment (including principal prepayment) by a
Borrower on account of principal of the Revolving Credit Loans shall be
applied first to Base Rate Revolving Portions and then to LIBOR
Revolving Portions.
(b) Term Loan A. Principal on account of Term Loan A shall
-----------
be payable jointly and severally by Borrowers as follows: (i) as
required pursuant to subsections 3.3.1, 3.3.2 and 3.3.3, (ii) 16
consecutive quarterly installments, each in the amount of $223,000,
commencing on July 1, 2003, and (iii) a final installment in the amount
of the remaining principal balance of Term Loan A on June 3, 2007.
Notwithstanding the foregoing, the entire unpaid principal balance of
Term Loan A shall be due and payable upon the termination of this
Agreement.
(c) Term Loan B. Principal on account of Term Loan B shall
-----------
be payable jointly and severally by Borrowers as follows: (i) as
required pursuant to subsections 3.3.1, 3.3.2 and 3.3.3, and (ii) on
June 3, 2007. Notwithstanding the foregoing, the entire unpaid
principal balance of Term Loan B shall be due and payable upon the
termination of this Agreement.
3.2.2. Interest.
--------
(a) Base Rate Portion. Interest accrued on Base Rate Portions
-----------------
shall be due and payable on the earliest of (1) the first calendar day
of each month (for the immediately preceding month), computed through
the last calendar day of the preceding month, (2) the occurrence of an
Event of Default in consequence of which Agent, Majority Lenders or
Majority Term Loan B Lenders (to the extent permitted under Section
10.2) elect to accelerate the maturity and payment of the Obligations
or (3) termination of this Agreement pursuant to Section 4 hereof.
(b) LIBOR Portion. Interest accrued on each LIBOR Portion
-------------
shall be due and payable on each LIBOR Interest Payment Date and on the
earlier of (1) the occurrence of an Event of Default in consequence of
which Agent, Majority
-18-
Lenders or Majority Term Loan B Lenders (to the extent permitted under
Section 10.2) elect to accelerate the maturity and payment of the
Obligations or (2) termination of this Agreement pursuant to Section 4
hereof.
(c) Term Loan B. Term Loan B Current Interest shall be due
-----------
and payable on the earliest of (1) the first calendar day of each month
(for the immediately preceding month) computed through the last
calendar day of the preceding month, (2) the occurrence of an Event of
Default in consequence of which Agent, Majority Lenders or Majority
Term Loan B Lenders (to the extent permitted under Section 10.2) elect
to accelerate the maturity and payment of the Obligations, or (3)
termination of this Agreement pursuant to Section 4 hereof. Term Loan B
PIK Interest shall be due and payable on the earliest of (A) the
maturity of Term Loan B, (B) the occurrence of an Event of Default in
consequence of which Agent, Majority Lenders or Majority Term Loan B
Lenders (to the extent permitted under Section 10.2) elect to
accelerate the maturity and payment of the Obligations, or
(C) termination of this Agreement pursuant to Section 4 hereof;
provided, that notwithstanding the foregoing, Borrowers may elect to
--------
pay in cash all or any portion of the Term Loan B PIK Interest accrued
as of the last day of any month, in each case so long as (i) Borrowers
are in compliance with the Fixed Charge Coverage Ratio covenant
contained in Section 8.3, determined as of the last day of the most
recent fiscal quarter on a pro forma basis, including such cash
interest payment in the calculation of Fixed Charges for such period,
(ii) Availability immediately after making such prepayment is at least
$5,000,000, and (iii) no Default or Event of Default is in existence or
would be caused thereby.
3.2.3. Costs, Fees and Charges. Costs, fees and charges payable
-----------------------
pursuant to this Agreement shall be jointly and severally payable by
Borrowers to Agent, as and when provided in Section 2 or Section 3
hereof, as applicable, for payment to Agent or a Lender, as applicable,
or to any other Person designated by Agent or such Lender in writing.
Payments hereunder owing to Tranche B Agent or any Term Loan B Lender
shall be paid by Agent, upon receipt thereof by Agent, to Tranche B
Agent for distribution to Term Loan B Lenders.
3.2.4. Other Obligations. The balance of the Obligations requiring
-----------------
the payment of money, if any, shall be jointly and severally payable by
Borrowers to Agent for distribution to Lenders, as appropriate and
pursuant to the application provisions set forth herein, as and when
provided in this Agreement, the Other Agreements or the Security
Documents, or on demand, whichever is later.
3.2.5. Prepayment of/Failure to Borrow LIBOR Portions. Borrowers may
----------------------------------------------
prepay a LIBOR Portion only upon at least three (3) Business
Days prior written notice to Agent (which notice shall be irrevocable).
Borrowers shall jointly and severally pay to each Revolving Credit and
Term Loan A Lender, upon request of such Revolving Credit and Term Loan
A Lender, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Revolving Credit and Term Loan A Lender) to
compensate such Revolving Credit and Term Loan A Lender for any loss,
-19-
cost, or expense incurred as a result of: (i) any payment of a LIBOR
Portion on a date other than the last day of the Interest Period for
such LIBOR Portion; (ii) any failure by Borrowers to borrow a LIBOR
Portion on the date specified by Borrowers' LIBOR Request; or (iii) any
failure by Borrowers to pay a LIBOR Portion on the date for payment
specified in Borrowers' written notice. Without limiting the foregoing,
Borrowers shall jointly and severally pay to each Revolving Credit and
Term Loan A Lender a "yield maintenance fee" in an amount computed as
follows: the current rate for United States Treasury securities (bills
on a discounted basis shall be converted to a bond equivalent) with a
maturity date closest to the Interest Period chosen pursuant to the
LIBOR Portion as to which the prepayment is made, shall be subtracted
from the LIBOR in effect at the time of prepayment. If the result is
zero or a negative number, there shall be no yield maintenance fee. If
the result is a positive number, then the resulting percentage shall be
multiplied by the amount of the principal balance being prepaid. The
resulting amount shall be divided by 360 and multiplied by the number
of days remaining in the Interest Period chosen pursuant to the LIBOR
Portion as to which the prepayment is made. Said amount shall be
reduced to present value calculated by using the above referenced
United States Treasury securities rate and the number of days remaining
in the term chosen pursuant to the LIBOR Portion as to which prepayment
is made. The resulting amount shall be the yield maintenance fee due to
the applicable Revolving Credit and Term Loan A Lender upon the
prepayment of a LIBOR Portion. If by reason of an Event of Default,
Agent, Majority Lenders or Majority Term Loan B Lenders (to the extent
permitted under Section 10.2) elect to declare the Obligations to be
immediately due and payable, then any yield maintenance fee with
respect to a LIBOR Portion shall become due and payable in the same
manner as though Borrowers had exercised such right of prepayment.
3.3. Mandatory and Optional Prepayments.
----------------------------------
3.3.1. Proceeds of Sale, Loss, Destruction or Condemnation of
------------------------------------------------------
Collateral. Except for dispositions of assets permitted by subsections
----------
8.2.9(ii) and 8.2.9(iii) and except as provided in subsection 8.2.9(v),
if any Borrower or any of its Domestic Subsidiaries sells any of its
Property or if any of its Property is lost or destroyed or taken by
condemnation, the applicable Borrower or Domestic Subsidiary shall,
unless otherwise agreed by Required Lenders, pay to Agent for the
benefit of Lenders as and when received by such Borrower or such
Domestic Subsidiary and as a mandatory prepayment of the Loans, as
herein provided, a sum equal to the proceeds (including insurance
payments but net of costs and taxes incurred in connection with such
sale or event) received by such Borrower or such Domestic Subsidiary
from such sale, loss, destruction or condemnation. To the extent that
the Property sold, lost, destroyed or condemned consists of Equipment,
real Property, or other Property other than Accounts or Inventory, the
applicable prepayment shall be applied, subject to Section 3.11, first,
-----
to Agent's costs and expenses relating to the relevant transaction,
second, to the installments of principal due under the Term A Notes
------
ratably, to be applied to future installment payments in inverse order
of maturity until paid in full,
-20-
third, at Agent's option, either (i) to repay outstanding principal of
-----
Revolving Credit Loans (but without permanently reducing the Revolving
Loan Commitments); provided, that the Special Reserve will be increased
--------
by the amount so applied to Revolving Credit Loans or (ii) to repay the
principal outstanding under the Term B Notes ratably, until paid in
full, fourth, if any Event of Default is in existence, to cash
------
collateralize the LC Amount (in the amount of 105% thereof), fifth, to
-----
repay any other Obligations then due and payable; provided, that
--------
(a) the Special Reserve shall be terminated after the Term B Notes have
been paid in full and (b) notwithstanding the foregoing, if (1) on the
date such prepayment is made no Event of Default is in existence or
would be caused thereby and (2) Availability immediately after making
such prepayment is equal to or greater than $5,000,000, such prepayment
shall be applied to the Obligations, first, to Agent's costs and
-----
expenses relating to the relevant transaction, second, to the
------
installments of principal due under the Term A Notes ratably, to be
applied to future installment payments in inverse order of maturity
until paid in full, third, to the principal outstanding under the Term
-----
B Notes ratably, until paid in full, fourth, to reduce the outstanding
------
principal balance of the Revolving Credit Loans (but not to permanently
reduce the Revolving Loan Commitments), and fifth, to repay other
-----
Obligations then due and payable. To the extent that the Property sold,
lost, destroyed or condemned consists of Accounts or Inventory, the
applicable prepayment shall be applied, subject to Section 3.11, to
reduce the outstanding principal balance of the Revolving Credit Loans,
but shall not permanently reduce the Revolving Loan Commitments.
Notwithstanding the foregoing:
(a) If the proceeds of insurance (net of costs and taxes
incurred) with respect to any loss or destruction of Equipment or real
Property of any Borrower or any Domestic Subsidiary (i) are less than
$250,000, unless an Event of Default is then in existence, Agent shall
apply such amounts to reduce the outstanding principal balance of the
Revolving Credit Loans (without permanently reducing the Revolving Loan
Commitments), (ii) are greater than or equal to $250,000 and less than
$3,500,000, unless an Event of Default is then in existence, such
amounts shall be provisionally applied to reduce the outstanding
principal balance of the Revolving Credit Loans (and a Rebuild Reserve
shall be created in the amount of such proceeds), until the earlier of
(1) Borrowers' decision not to repair or replace the damaged Property
(in which case such amount shall be applied to the Obligations in the
manner specified in the second sentence of this subsection 3.3.1 until
payment thereof in full) or (2) the expiration of three hundred
sixty-five (365) days from the receipt of such amount, or (iii) are
equal to or greater than $3,500,000, and Borrowers have requested that
Agent and Tranche B Agent both agree to permit the applicable Borrower
or Domestic Subsidiary to repair or replace the damaged Property, such
amounts shall be provisionally applied to reduce the outstanding
principal balance of the Revolving Credit Loans (and a Rebuild Reserve
shall be created in the amount of such proceeds), until the earliest of
(1) Agent's and Tranche B Agent's decision with respect thereto, (2)
the expiration of one hundred twenty (120) days from the date of such
request, unless the applicable Borrower or Domestic Subsidiary has
commenced action to replace or rebuild the damaged Property, or (3) the
expiration of three
-21-
hundred sixty-five (365) days from such request. If Borrowers decide to
repair or replace the applicable Property under clause (ii) above or if
both Agent and Tranche B Agent agree, in their reasonable judgment, to
permit any such repair or replacement under clause (iii) above, the
applicable amount shall, unless an Event of Default is in existence, be
released from the Rebuild Reserve to the applicable Borrower or
Domestic Subsidiary as needed for use in replacing or repairing the
damaged Property during such three hundred sixty-five (365) day period,
with any remaining amount at the end of such three hundred sixty-five
(365) day period applied to the Obligations in the manner specified in
the second sentence of this subsection 3.3.1 until payment thereof in
full; and in the case of clause (iii) above, if either Agent or Tranche
B Agent declines to permit any such repair or replacement or fails to
respond to Borrowers within such three hundred sixty-five (365) day
period, such amount shall be released from the Rebuild Reserve and
applied to the Obligations in the manner specified in the second
sentence of this subsection 3.3.1 until payment thereof in full.
(b) If any proceeds of insurance with respect to any loss or
destruction of Equipment or real Property of any Foreign Subsidiary are
repatriated to the United States, such amounts (net of any costs or
taxes incurred with respect thereto) shall be applied to the
Obligations as set forth in the second sentence of subsection 3.3.1. If
the proceeds of any sale or other disposition of Property of any
Foreign Subsidiary are repatriated to the United States, such amounts
(net any costs or taxes incurred with respect thereto) shall be applied
to the Obligations in the manner set forth for Property of such type in
the second or third sentence of this subsection 3.3.1, as applicable.
(c) If any sale of Collateral involves both Fixed Assets and
Other Assets or if such sale involves a sale of all or substantially
all of the capital stock or Properties of any Borrower or any
Subsidiary, or of any business line of such Borrower or such
Subsidiary, then the proceeds thereof will be allocated as follows for
the purposes of this subsection 3.3.1: (i) first, to Accounts and
Inventory, to the extent of the book value thereof, (ii) second, to
Equipment and real Property, to the extent of the greater of the book
value or fair market appraised value thereof (if an appraisal
reasonably acceptable to both Agent and Tranche B Agent exists) and
(iii) third, to goodwill. Subject to Section 3.11, amounts so allocated
to Accounts and Inventory shall be applied to the Obligations as set
forth in the third sentence of subsection 3.3.1. Subject to Section
3.11, amounts so allocated to Equipment and real Property shall be
applied to the Obligations as set forth in the second sentence of
subsection 3.3.1. Subject to Section 3.11, amounts so allocated to
goodwill shall be applied to the Obligations as set forth in the second
sentence of subsection 3.3.1 (other than proviso (b) thereof);
provided, that notwithstanding the foregoing, if (1) on the date the
--------
applicable prepayment is made no Event of Default is in existence and
(2) Availability immediately after making such prepayment is equal to
or greater than $5,000,000, such prepayment shall be applied to the
Obligations, first, to Agent's costs and expenses relating to the
-----
relevant transaction, second, to the principal outstanding under the
------
Term B Notes ratably, until paid in full, third, to the
-----
-22-
installments of principal due under the Term A Notes ratably, to be
applied to future installment payments in inverse order of maturity
until paid in full, fourth, to reduce the outstanding principal balance
------
of the Revolving Credit Loans (but not to permanently reduce the
Revolving Loan Commitments), and fifth, to repay other Obligations then
-----
due and payable.
3.3.2. Excess Cash Flow Recapture. Borrowers shall jointly and
--------------------------
severally prepay the Loans in amounts equal to Borrowers' Excess Cash
Flow (i) for the period from June 8, 2003 through and including
November 1, 2003 and (ii) for each subsequent fiscal year of Borrowers
during the Term hereof, each such prepayment to be based upon, and made
within five (5) Business Days following the due date for delivery by
Borrowers to Agent of, the applicable annual financial statements
required by subsection 8.1.3(i) hereof. Subject to Section 3.11, each
such prepayment shall be applied to the Term Loans, as follows: first,
to installments of principal due under the Term A Notes ratably, to be
applied to future installment payments in inverse order of maturity
until paid in full, and second, to principal outstanding under the Term
B Notes ratably, until paid in full. The Special Reserve shall be
increased by any amounts in respect of Borrowers' Excess Cash Flow that
are applied to the Revolving Credit Loans pursuant to Section 3.11;
provided, that the Special Reserve shall be terminated after the Term B
--------
Notes have been paid in full.
3.3.3. Other Mandatory Prepayments. If any Borrower or any Subsidiary
---------------------------
receives any proceeds from any tax refunds, indemnity payments or
pension plan reversions, Borrowers shall jointly and severally pay to
Agent for the benefit of Lenders, when and as received by such Borrower
or such Subsidiary, and as a mandatory prepayment of the Obligations, a
sum equal to 100% of such proceeds of such tax refund, indemnity
payment or pension plan reversions. Any such prepayment shall be
applied to the Obligations in the manner specified in the third
sentence of subsection 3.3.1 until payment thereof in full.
3.3.4. LIBOR Portions. If the application of any payment made in
--------------
accordance with the provisions of this Section 3.3 at a time when no
Event of Default has occurred and is continuing would result in
termination of a LIBOR Portion prior to the last day of the Interest
Period for such LIBOR Portion, the amount of such prepayment shall not
be applied to such LIBOR Portion, but will, at Borrowers' option, be
held by Agent in a non-interest bearing account at a Lender or another
bank satisfactory to Agent in its discretion, which account is in the
name of Agent and from which account only Agent can make any
withdrawal, in each case to be applied as such amount would otherwise
have been applied under this Section 3.3 at the earlier to occur of (i)
the last day of the relevant Interest Period or (ii) the occurrence of
a Default or an Event of Default.
3.3.5. Optional Prepayments. Borrowers may, at their option from time
--------------------
to time upon not less than 3 Business Days' prior written notice to
Agent, prepay installments of the Term A Notes, provided that the
--------
amount of any such prepayment is at least $500,000 and in integral
multiples of $100,000 above $500,000, and that
-23-
such prepayments are made ratably with respect to all Term A Notes.
Each such prepayment shall be applied to the installments of principal
due under the Term A Notes in the inverse order of maturity. Borrowers
may, at their option from time to time upon not less than three (3)
Business Days' prior written notice to Agent, prepay principal of the
Term B Notes (on a ratable basis), in minimum amounts of at least
$500,000 and in integral multiples of $100,000 above $500,000, in each
case so long as (i) in the case of partial prepayments of the Term B
Notes only, Borrowers are in compliance with the Fixed Charge Coverage
Ratio covenant contained in Section 8.3, determined as of the last day
of the most recent fiscal quarter on a pro forma basis, including the
principal amount of Term Loan B to be so prepaid in the calculation of
fixed charges for such period, (ii) Availability immediately after
making such prepayment is at least $5,000,000 and (iii) no Default or
Event of Default is in existence at the time of such prepayment or
would be caused by the making of such prepayment. In addition,
Borrowers may make only 2 partial prepayments of Term Loan B and the
Term B Notes in any calendar year and such partial prepayments may be
made only (a) once during the period from January 1 through January 31
of each year and (b) once during the period from July 1 through August
1 of each year. Any such optional prepayment of Term A Notes and/or
Term B Notes under this subsection 3.3.5 shall be credited against the
amount of the mandatory prepayment required under subsection 3.3.2 for
the fiscal year in which such optional prepayment was made. Except for
charges under subsection 3.2.5 applicable to prepayments of LIBOR Term
A Portions, and except for fees under Section 2.6 applicable to
prepayments of the Term A Notes or Term B Notes, such prepayments shall
be without premium or penalty.
3.3.6. Optional Reductions of Revolving Loan Commitments. Borrowers
-------------------------------------------------
may, at their option from time to time but not more than once in any
12-month period upon not less than three (3) Business Days' prior
written notice to Agent, terminate in whole or permanently reduce
ratably in part, the unused portion of the Revolving Loan Commitments,
provided, however, that (i) each such partial reduction shall be in an
amount of $2,000,000 or integral multiples of $1,000,000 in excess
thereof and (ii) the aggregate of all optional reductions to the
Revolving Loan Commitments may not exceed $5,000,000 during any
12-month period or $10,000,000 during the Term. Except for charges
under subsection 3.2.5 applicable to prepayments of LIBOR Revolving
Portions and except for fees under Section 2.6 applicable to reduction
or termination of the Revolving Loan Commitments, such reductions and
terminations shall be without premium or penalty.
3.3.7. No Term Loan Reborrowing. No amounts repaid or prepaid with
------------------------
respect to Term Loan A or Term Loan B may be reborrowed.
3.4. Application of Payments and Collections.
---------------------------------------
3.4.1. Collections. All items of payment received by Agent by 12:00
-----------
noon, Chicago, Illinois, time, on any Business Day shall be deemed
received on that Business Day. All items of payment received after
12:00 noon, Chicago, Illinois,
-24-
time, on any Business Day shall be deemed received on the following
Business Day. If as the result of collections of Accounts as authorized
by subsection 6.2.4 hereof or otherwise, a credit balance exists in any
Loan Account, such credit balance shall not accrue interest in favor of
Borrowers, but shall be disbursed to a Borrower or otherwise at a
Borrower's direction in the manner set forth in subsection 3.1.2, upon
a Borrower's request at any time, so long as no Default or Event of
Default then exists. Agent may at its option, offset such credit
balance against any of the Obligations upon and during the continuance
of an Event of Default.
3.4.2. Apportionment, Application and Reversal of Payments. Principal
---------------------------------------------------
and interest payments shall be apportioned ratably among Lenders
(according to the unpaid principal balance of the Loans to which such
payments relate held by each Lender). All payments hereunder shall be
remitted to Agent. All proceeds of equity obtained by any Borrower or
any Subsidiary, all payments in respect of Guaranty Agreements and all
other cash obtained by any Borrower or any Domestic Subsidiary shall be
immediately deposited into a Dominion Account. Except as provided in
Section 3.11, all proceeds of Collateral not relating to principal or
interest of specific Loans, or not constituting payment of specific
fees, all proceeds of Accounts, or, except as provided in Section
3.3.1, other Collateral received by Agent, including without limitation
all amounts deposited in a Dominion Account, shall be applied, ratably,
subject to the provisions of this Agreement, first, to pay any fees,
-----
indemnities, or expense reimbursements (other than amounts related to
Product Obligations) then due to Agent or Lenders from any Borrower;
second, to pay interest due from Borrowers in respect of all Loans,
------
including Agent Loans; third, to pay or prepay principal of Agent
-----
Loans; fourth, to pay or prepay principal of the Revolving Credit Loans
------
(other than Agent Loans) and unpaid reimbursement in respect of Letter
of Credit Obligations; fifth, if an Event of Default is in existence,
-----
to pay an amount to Agent equal to all outstanding Letter of Credit
Obligations to be held as cash Collateral for such Obligations (in the
amount of 105% of the LC Amount); sixth, to the payment of principal
-----
then due in respect of Term Loan A; seventh, to the payment of
-------
principal then due in respect of Term Loan B; eighth, to the payment of
------
any other Obligation (other than amounts related to Product
Obligations) due to Agent or any Lender by any Borrower; and ninth, to
-----
pay any amounts due with respect to Product Obligations. After the
occurrence and during the continuance of an Event of Default, Agent
shall have the continuing exclusive right to apply and reapply (without
requiring any turnover) any and all such payments and collections
received at any time or times hereafter by Agent or its agent against
the Obligations, as set forth in Section 3.11, notwithstanding any
entry by Agent or any Lender upon any of its books and records.
3.5. All Loans to Constitute One Obligation.
--------------------------------------
The Loans, the LC Amount and the other Obligations shall constitute
one general joint and several obligation of Borrowers, and shall be secured
by Agent's Lien upon all of the Collateral. All of the Obligations are and
shall be deemed to be pari passu with each other and none of the Revolving
---- -----
Credit Loans, Term Loan A, Term Loan B or any of the other
-25-
Obligations are or shall be deemed to be subordinate or junior in right of
payment to any other of such facilities or Obligations.
3.6. Loan Account.
------------
Agent shall enter all Loans as debits to one or more loan accounts
(each, a "Loan Account") and shall also record in the appropriate Loan
Account all payments made by each Borrower on any Obligations and all
proceeds of Collateral which are finally paid to Agent, and may record
therein, in accordance with customary accounting practice, other debits and
credits, including interest and all charges and expenses properly chargeable
to each Borrower.
3.7. Statements of Account.
---------------------
Agent will account to Borrowers monthly with a statement of Loans,
charges and payments made pursuant to this Agreement during the immediately
preceding month, and such account rendered by Agent shall be deemed final,
binding and conclusive upon Borrowers absent demonstrable error unless Agent
is notified by Borrowers in writing to the contrary within thirty (30) days
of the date each accounting is received by Borrowers. Such notice shall only
be deemed an objection to those items specifically objected to therein.
3.8. Increased Costs.
---------------
If any law or any governmental or quasi-governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law)
adopted or implemented after the date of this Agreement and having general
applicability to all banks or finance companies within the jurisdiction in
which any Lender operates (excluding, for the avoidance of doubt, the effect
of and phasing in of capital requirements or other regulations or guidelines
passed prior to the date of this Agreement), or any interpretation or
application thereof by any governmental authority charged with the
interpretation or application thereof, or the compliance of such Lender
therewith, shall:
(i) (1) subject such Lender to any tax with respect to this
Agreement (other than (a) any tax based on or measured by net income or
otherwise in the nature of a net income tax, including, without
limitation, any franchise tax or any similar tax based on capital, net
worth or comparable basis for measurement and (b) any tax collected by
a withholding on payments and which neither is computed by reference
to the net income of the payee nor is in the nature of an advance
collection of a tax based on or measured by the net income of the
payee) or (2) change the basis of taxation of payments to such Lender
of principal, fees, interest or any other amount payable hereunder or
under any Loan Documents (other than in respect of (a) any tax based
on or measured by net income or otherwise in the nature of a net
income tax, including, without limitation, any franchise tax or any
similar tax based on capital, net worth or comparable basis for
measurement and (b) any tax collected by a withholding on payments and
which neither is computed by
-26-
reference to the net income of the payee nor is in the nature of an
advance collection of a tax based on or measured by the net income of
the payee);
(ii) impose, modify or hold applicable any reserve (except
any reserve taken into account in the determination of the applicable
LIBOR), special deposit, assessment or similar requirement against
assets held by, or deposits in or for the account of, advances or loans
by, or other credit extended by, any office of such Lender, including
(without limitation) pursuant to Regulation D of the Board of Governors
of the Federal Reserve System; or
(iii) impose on such Lender or the London interbank market any
other condition with respect to any Loan Document;
and the result of any of the foregoing is to increase the cost to such
Lender of making, renewing or maintaining Loans hereunder or the result of
any of the foregoing is to reduce the rate of return on such Lender's
capital as a consequence of its obligations hereunder, or the result of any
of the foregoing is to reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of any of the Loans, then, in
any such case, Borrowers shall jointly and severally pay such Lender, not
later than sixty (60) days following its receipt of notice of the imposition
of such increased costs and the certification set forth below, such
additional amount as will compensate such Lender for such additional cost or
such reduction, as the case may be, to the extent such Lender has not
otherwise been compensated, with respect to a particular Loan, for such
increased cost as a result of an increase in the Base Rate or the LIBOR. An
officer of the applicable Lender shall determine the amount of such
additional cost or reduced amount using reasonable averaging and attribution
methods and shall certify the amount of such additional cost or reduced
amount to Borrowers, which certification shall include a written explanation
of such additional cost or reduction to Borrowers. Such certification shall
be conclusive absent demonstrable error. If a Lender claims any additional
cost or reduced amount pursuant to this Section 3.8, then such Lender shall
use reasonable efforts (consistent with legal and regulatory restrictions)
to designate a different lending office or to file any certificate or
document reasonably requested by Borrowers if the making of such designation
or filing would avoid the need for, or reduce the amount of, any such
additional cost or reduced amount and would not, in the reasonable judgment
of such Lender, be otherwise disadvantageous to such Lender.
3.9. Basis for Determining Interest Rate Inadequate.
----------------------------------------------
In the event that Agent or any Revolving Credit and Term Loan A
Lender shall have determined that:
(i) reasonable means do not exist for ascertaining the LIBOR
for any Interest Period; or
(ii) Dollar deposits in the relevant amount and for the
relevant maturity are not available in the London interbank market
with respect to a
-27-
proposed LIBOR Portion, or a proposed conversion of a Base Rate
Portion into a LIBOR Portion; then
Agent or such Revolving Credit and Term Loan A Lender shall give Borrowers
prompt written, telephonic or electronic notice of the determination of such
effect. If such notice is given, (i) any such requested LIBOR Portion shall
be made as a Base Rate Portion, unless Borrowers shall notify Agent no later
than 10:00 a.m. (Chicago, Illinois time) one (1) Business Day prior to the
date of such proposed borrowing that the request for such borrowing shall be
canceled or made as an unaffected type of LIBOR Portion, and (ii) any Base
Rate Portion which was to have been converted to an affected type of LIBOR
Portion shall be continued as or converted into a Base Rate Portion, or, if
Borrowers shall notify Agent, no later than 10:00 a.m. (Chicago, Illinois
time) one (1) Business Day prior to the proposed conversion, shall be
maintained as an unaffected type of LIBOR Portion. Agent shall give
Borrowers prompt notice if and when any such determination is no longer in
effect.
3.10. Sharing of Payments, Etc.
-------------------------
Subject to Section 3.11 and the other provisions of this Agreement
relating to the application of funds received by Agent and the Lenders, if
any Lender shall obtain any payment (whether voluntary, involuntary, through
the exercise of any right of set-off, or otherwise) on account of any
Loan made by it in excess of its ratable share of payments on account
of Loans made by all Lenders, such Lender shall forthwith purchase
from each other Lender such participation in such Loan as shall be necessary
to cause such purchasing Lender to share the excess payment ratably with
each other Lender; provided, that if all or any portion of such excess
--------
payment is thereafter recovered from such purchasing Lender, such purchase
from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lenders the purchase price to the extent of such recovery,
together with an amount equal to such Lender's ratable share (according to
the proportion of (i) the amount of such Lender's required repayment to (ii)
the total amount so recovered from the purchasing Lender) of any interest or
other amount paid or payable by the purchasing Lender in respect of the
total amount so recovered. Borrowers agree that any Lender so purchasing a
participation from another Lender pursuant to this Section 3.10 may, to the
fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully
as if such Lender were the direct creditor of each Borrower in the amount of
such participation. Notwithstanding anything to the contrary contained
herein, all purchases and repayments to be made under this Section 3.10
shall be made through Agent. Each Lender agrees with each other Lender that
if an amount to be set off by such Lender or an Affiliate of such Lender as
described herein (other than any amount held by such Lender or such
Affiliate specifically as collateral security for Indebtedness (other than
the Obligations) of a Borrower or a Subsidiary to such Lender) is to be
applied by such Lender to Indebtedness (other than the Obligations) of any
Borrower or any Subsidiary to such Lender, such amount shall be applied
ratably to such other Indebtedness and to the portion of the Obligations
held by such Lender, and, as to the portion of such amount applied to the
Obligations, shall be subject to the provisions of this Section 3.10
regarding purchases of participations.
-28-
3.11. Post Event of Default Allocation.
--------------------------------
3.11.1. Allocation. After the occurrence and during the continuance
----------
of an Event of Default under subsection 10.1.1, subsection 10.1.3
caused by a breach of Section 8.3 or subsection 10.1.8 (collectively,
"Key Defaults") of this Agreement (until the act or omission
constituting such Key Default is cured or such Key Default is waived),
Agent shall apply all proceeds of the Collateral, including all amounts
held in any Dominion Account, subject to the provisions of this
Agreement, all payments under subsections 3.3.2 and 3.3.3 hereof,
(i) first, ratably to pay any fees, expense reimbursements, indemnities
-----
and other amounts then due to Agent (other than in respect of Product
Obligations and other than prepayment fees payable under subsection
2.6(a)) until paid in full; (ii) second, ratably to pay any fees,
------
expense reimbursements and indemnities then due to Revolving Credit and
Term Loan A Lenders (other than prepayment fees payable under
subsection 2.6(a)) until paid in full; (iii) third, ratably to pay
-----
interest due in respect of Term Loan A and the Revolving Credit Loans
(other than Excess Advances) until paid in full; (iv) fourth, ratably
------
to pay the principal of Term Loan A and the Revolving Credit Loans
(other than Excess Advances) and unpaid reimbursements in respect of
Letter of Credit Obligations (other than Excess Advances) until paid in
full; (v) fifth, to the extent not funded by a Revolving Credit Loan,
-----
to pay any amounts Borrowers are required to deposit with Agent
pursuant to subsection 10.3.5 hereof (other than Excess Advances);
(vi) sixth, ratably to pay any amounts then due with respect to Product
-----
Obligations up to an aggregate amount equal to the sum of (a) the
amount of obligations arising with respect to matters described in
clauses (i) and (ii) of the definition of the term Product Obligations;
-------------------
provided, that the amount of such obligations in respect of outgoing
--------
ACH transactions shall not exceed $3,500,000 at any time outstanding
and (b) without duplication of clause (a), the amount of any reserves
related to Product Obligations imposed by Agent pursuant to subsection
1.1.1; (vii) seventh, ratably to pay any fees, expense reimbursements,
-------
indemnities and other amounts then due to Term Loan B Lenders (other
than prepayment fees payable under subsection 2.6(b)); eighth, ratably
------
to pay interest due in respect of Term Loan B until paid in full;
ninth, ratably to pay the principal of Term Loan B until paid in full;
-----
tenth, ratably to pay prepayment fees owing to Term Loan A and
-----
Revolving Credit Lenders under subsection 2.6(a)); eleventh, ratably to
--------
pay prepayment fees owing to Term Loan B Lenders under subsection
2.6(b)); and twelfth, to the ratable payment of all other Obligations
-------
then due and payable.
3.11.2. Rights of Holders of Term Loan B Obligations. One or more
--------------------------------------------
of the holders of Term Loan B Obligations may at any time freely hold
or from time to time acquire other Loans or commitments to make other
Loans hereunder and related rights and benefits arising under this
Agreement, including voting power as a Lender entitled to be counted
for purposes of determining whether an action has been taken or
approved by Majority Lenders or Required Lenders, and as such shall be
in all respects entitled to fully participate in, enjoy and enforce all
of the rights, privileges and benefits accorded to the holders of such
Loans and commitments to make Loans
-29-
to the extent of its interests in such Loans or commitments, including
the right to exercise such voting power and otherwise act as it may see
fit to protect and enhance its own interests (including any potentially
conflicting interest as a holder of Term Loan B Obligations) on any
basis elected by it, without any limitation or restriction whatsoever.
3.11.3. Conflict of Terms. In the event of a direct conflict between
-----------------
the application provisions of this Section 3.11 and other provisions
contained in any other Loan Document, it is the intention of the
parties hereto that all such application provisions shall be read
together and construed, to the fullest extent possible, to be in
concert with each other. In the event of any actual, irreconcilable
conflict that cannot be resolved as aforesaid, the terms and provisions
of this Section 3.11 shall control and govern.
SECTION 4. TERM AND TERMINATION
4.1. Term of Agreement.
-----------------
Subject to Agent's and Revolving Credit and Term Loan A
Lenders' right to cease making Loans to Borrowers during the continuance of
any Default or Event of Default, this Agreement shall be in effect for a
period of 4 years from the date hereof, through and including June 3, 2007
(the "Term"), unless terminated as provided in Section 4.2 hereof.
4.2. Termination.
-----------
4.2.1. Termination by Lenders. Agent may, and at the direction of
----------------------
Majority Lenders or Majority Term Loan B Lenders (to the extent
permitted under Section 10.2) shall, terminate this Agreement without
notice upon or after the occurrence and during the continuance of an
Event of Default.
4.2.2. Termination by Borrowers. Upon at least thirty (30) days prior
------------------------
written notice to Agent and Lenders, Borrowers may, at their option,
terminate this Agreement; provided, however, no such termination shall
-------- -------
be effective until Borrowers have paid or collateralized to both
Agent's and Tranche B Agent's reasonable satisfaction all of the
Obligations in immediately available funds, all Letters of Credit and
LC Guaranties have expired, terminated or have been cash collateralized
to Agent's reasonable satisfaction and Borrowers have complied with
Section 2.6 and subsection 3.2.5. Any notice of termination given by
Borrowers shall be irrevocable unless all Lenders otherwise agree in
writing and no Revolving Credit and Term Loan A Lender shall have any
obligation to make any Loans or issue or procure any Letters of Credit
or LC Guaranties on or after the termination date stated in such
notice. Borrowers may elect to terminate this Agreement in its entirety
only. No section of this Agreement or type of Loan available hereunder
may be terminated singly.
-30-
4.2.3. Effect of Termination. All of the Obligations shall be
---------------------
immediately due and payable upon the termination date stated in any
notice of termination of this Agreement. All undertakings, agreements,
covenants, warranties and representations of Borrowers contained in the
Loan Documents shall survive any such termination and Agent shall
retain its Liens in the Collateral and Agent and each Lender shall
retain all of its rights and remedies under the Loan Documents
notwithstanding such termination until all Obligations have been
discharged or paid, in full, in immediately available funds, including,
without limitation, all Obligations under Section 2.6 and subsection
3.2.5 resulting from such termination. Notwithstanding the foregoing or
the payment in full of the Obligations, Agent shall not be required to
terminate its Liens in the Collateral unless, with respect to any loss
or damage Agent may incur as a result of dishonored checks or other
items of payment received by Agent from any Borrower or any Account
Debtor and applied to the Obligations, Agent shall, at its option, (i)
have received a written agreement reasonably satisfactory to Agent,
executed by Borrowers and by any Person whose loans or other advances
to any Borrower are used in whole or in part to satisfy the
Obligations, indemnifying Agent and each Lender from any such loss or
damage or (ii) have retained cash Collateral or other Collateral for
such period of time as Agent, in its reasonable discretion, may deem
necessary to protect Agent and each Lender from any such loss or
damage.
SECTION 5. SECURITY INTERESTS
5.1. Security Interest in Collateral.
-------------------------------
To secure the prompt payment and performance to Agent and each Lender
of the Obligations, each Borrower hereby grants to Agent, for the benefit of
itself and each Lender in accordance with the priorities set forth herein, a
continuing Lien upon all of such Borrower's assets, including all of the
following Property and interests in Property of such Borrower, whether now
owned or existing or hereafter created, acquired or arising and wheresoever
located, but excluding any Excluded Property of such Borrower:
(i) Accounts;
(ii) Certificated Securities;
(iii) Chattel Paper;
(iv) Computer Hardware and Software and all rights with
respect thereto, including, any and all licenses, options,
warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights, renewal
rights and indemnifications, and any substitutions, replacements,
additions or model conversions of any of the foregoing;
(v) Contract Rights;
(vi) Deposit Accounts;
-31-
(vii) Documents;
(viii) Equipment;
(ix) Financial Assets;
(x) Fixtures;
(xi) General Intangibles, including Payment Intangibles and
Software;
(xii) Goods (including all of its Equipment, Fixtures and
Inventory), and all accessions, additions, attachments, improvements,
substitutions and replacements thereto and therefor;
(xiii) Instruments;
(xiv) Intellectual Property;
(xv) Inventory;
(xvi) Investment Property;
(xvii) money (of every jurisdiction whatsoever);
(xviii) Letter-of-Credit Rights;
(xix) Payment Intangibles;
(xx) Security Entitlements;
(xxi) Software;
(xxii) Supporting Obligations;
(xxiii) Uncertificated Securities; and
(xxiv) to the extent not included in the foregoing, all other
personal property of any kind or description;
together with all books, records, writings, data bases, information and
other property relating to, used or useful in connection with, or
evidencing, embodying, incorporating or referring to any of the foregoing,
and all Proceeds, products, offspring, rents, issues, profits and returns of
and from any of the foregoing.
-32-
5.2. Other Collateral.
----------------
5.2.1. Commercial Tort Claims. The applicable Borrower shall promptly
notify Agent in writing upon incurring or otherwise obtaining after the
Closing Date a Commercial Tort Claim against any third party with a
value in excess of $250,000 or upon a Responsible Officer obtaining
knowledge of any other Commercial Tort Claim against any third party
and, upon request of Agent, promptly enter into an amendment to this
Agreement and do such other acts or things reasonably deemed
appropriate by Agent to give Agent a security interest in any such
Commercial Tort Claim. Each Borrower represents and warrants that as of
the date of this Agreement, to its knowledge, it does not possess any
Commercial Tort Claims.
5.2.2. Other Collateral. The applicable Borrower shall promptly notify
----------------
Agent in writing upon acquiring or otherwise obtaining any Collateral
after the date hereof consisting of Letter-of-Credit Rights or
Electronic Chattel Paper with a value in excess of $250,000 or upon a
Responsible Officer obtaining knowledge of any other such Collateral,
and, upon the request of Agent, promptly execute such other documents,
and do such other acts or things reasonably deemed appropriate by Agent
to deliver to Agent control with respect to such Collateral; promptly
notify Agent in writing upon acquiring or otherwise obtaining any
Collateral after the date hereof consisting of Deposit Accounts or
Investment Property with a value in excess of $250,000 or upon a
Responsible Officer obtaining knowledge of any other such Collateral
and promptly execute such other documents, and do such other acts or
things reasonably deemed appropriate by Agent to deliver to Agent
control with respect to such Collateral; promptly notify Agent in
writing upon acquiring or otherwise obtaining any Collateral after the
date hereof consisting of Documents or Instruments with a value in
excess of $250,000 or upon a Responsible Officer obtaining knowledge of
any other such Collateral and, upon the request of Agent, will promptly
execute such other documents, and do such other acts or things
reasonably deemed appropriate by Agent to deliver to Agent possession
of such Documents which are negotiable and Instruments, and, with
respect to nonnegotiable Documents, to have such nonnegotiable
Documents issued in the name of Agent; and with respect to Collateral
in the possession of a third party, other than Certificated Securities
and Goods covered by a Document, upon Agent's request, use its best
efforts to obtain an acknowledgement from the third party that it is
holding the Collateral for the benefit of Agent.
5.3. Lien Perfection; Further Assurances.
-----------------------------------
Each Borrower shall, upon the request of Agent, execute such
instruments, assignments or documents as are necessary to perfect
Agent's Lien upon any of the Collateral, and take such other action as may
be required to perfect or to continue the perfection of Agent's Lien upon
the Collateral. Unless prohibited by applicable law, each Borrower hereby
authorizes Agent to execute and file any such financing statement,
including, without limitation, financing statements that indicate the
Collateral (i) as all assets of such Borrower or words of similar effect, or
(ii) as being of an equal or lesser scope, or with greater or lesser detail,
than as
-33-
set forth in Section 5.1, on such Borrower's behalf. Each Borrower also
hereby ratifies its authorization for Agent to have filed in any
jurisdiction any like financing statements or amendments thereto if filed
prior to the date hereof. The parties agree that a carbon, photographic or
other reproduction of this Agreement shall be sufficient as a financing
statement and may be filed in any appropriate office in lieu thereof. At
Agent's request, each Borrower shall also promptly execute or cause to be
executed and shall deliver to Agent any and all documents, instruments and
agreements reasonably deemed necessary by Agent, to give effect to or carry
out the terms or intent of the Loan Documents.
5.4. Lien on Realty.
--------------
The due and punctual payment and performance of the Obligations
shall also be secured by the Lien created by Mortgages upon all real
Property of each Borrower or Subsidiary now or hereafter owned, including
without limitation any real Property purchased pursuant to a purchase option,
and upon Falcon's leased real Property located in Belmont, Mississippi. Each
Mortgage shall be executed by the applicable Borrower or Subsidiary in favor
of Agent. Each Mortgage shall be duly recorded, at Borrowers' joint and
several expense, in each office where such recording is required to
constitute a fully perfected first Lien on the real Property covered thereby.
Except to the extent Agent may not require the following for any particular
property, the applicable Borrower or Subsidiary shall deliver to Agent,
at Borrowers' joint and several expense, mortgagee title insurance policies
issued by a title insurance company satisfactory to Agent, which policies
shall be in form and substance satisfactory to Agent and shall insure a
valid first Lien in favor of Agent, for the benefit of itself and the
Lenders, on the Property covered by each Mortgage, subject only to those
exceptions reasonably acceptable to Agent and its counsel. The applicable
Borrower or Subsidiary shall deliver to Agent such other documents, including,
without limitation, as-built survey prints of the real Property, as Agent
and its counsel may reasonably request relating to the real Property subject
to the Mortgages.
5.5. Pledge of Securities.
--------------------
Each Borrower agrees to, or cause its applicable Domestic
Subsidiary to, execute a Pledge Agreement and such other agreements,
instruments and documents as both Agent and Tranche B Agent determine are
reasonably necessary, by which it pledges to Agent and grants to Agent a
Lien on (i) 100% of the Securities of each Domestic Subsidiary owned by such
Borrower or such Domestic Subsidiary, as the case may be, and (ii) 65% of
the Securities of each Foreign Subsidiary owned by such Borrower or such
Domestic Subsidiary, as applicable, designated by Agent from time to time.
On the Closing Date, Agent agrees not to so designate any Foreign Subsidiary
that has immaterial assets and operations. Agent further agrees not to so
designate Industrial Mueblera ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, S.A. de C.V., unless it
continues to have any material assets or operations after December 31, 2003.
-34-
SECTION 6. COLLATERAL ADMINISTRATION
6.1. General.
-------
6.1.1. Location of Collateral. All Collateral, other than Inventory in
----------------------
transit and motor vehicles, will at all times be kept by a Borrower or
one of its Subsidiaries at one or more of the business locations set
forth in Exhibit 6.1.1 hereto, as updated by Borrowers providing prior
-------------
written notice to Agent of any new location.
6.1.2. Insurance of Collateral. Borrowers shall maintain and pay for
-----------------------
insurance upon all Collateral wherever located and with respect to the
business of each Borrower and each of its Subsidiaries, covering
casualty, hazard, public liability, workers' compensation, business
interruption and such other risks in such amounts and with such
insurance companies as are reasonably satisfactory to Agent. Borrowers
shall deliver certified copies of such policies to Agent as promptly as
practicable, with satisfactory lender's loss payable endorsements,
naming Agent as a loss payee, assignee or additional insured, as
appropriate, as its interest may appear, showing only such other loss
payees, assignees and additional insureds as are satisfactory to Agent
and with respect to business interruption insurance, an executed
collateral assignment thereof. Each policy of insurance or endorsement
shall contain a clause requiring the insurer to give not less than ten
(10) days' prior written notice to Agent in the event of cancellation
of the policy for nonpayment of premium and not less than thirty (30)
days' prior written notice to Agent in the event of cancellation of the
policy for any other reason whatsoever and a clause specifying that the
interest of Agent shall not be impaired or invalidated by any act or
neglect of any Borrower, any of its Subsidiaries or the owner of the
Property or by the occupation of the premises for purposes more
hazardous than are permitted by said policy. Borrowers agree to deliver
to Agent, promptly as rendered, true copies of all reports made in any
reporting forms to insurance companies. All proceeds of business
interruption insurance (if any) of each Borrower and its Subsidiaries
shall be remitted to Agent for application to the outstanding balance
of the Revolving Credit Loans.
Unless Borrowers provide Agent with evidence of the insurance coverage
required by this Agreement, Agent may purchase insurance at Borrowers'
joint and several expense to protect Agent's interests in the
Properties of each Borrower and its Subsidiaries. This insurance may,
but need not, protect the interests of each Borrower and its
Subsidiaries. The coverage that Agent purchases may not pay any claim
that a Borrower or any Subsidiary of such Borrower makes or any claim
that is made against a Borrower or any such Subsidiary in connection
with said Property. Borrowers may later cancel any insurance purchased
by Agent, but only after providing Agent with evidence that Borrowers
and their Subsidiaries have obtained insurance as required by this
Agreement. If Agent purchases insurance, Borrowers will be jointly and
severally responsible for the costs of that insurance, including
interest and any other charges Agent may impose in connection with the
placement of insurance, until the effective date of the cancellation or
expiration of the insurance. The costs of the insurance may
-35-
be added to the Obligations. The costs of the insurance may be more
than the cost of insurance that Borrowers and the Subsidiaries may be
able to obtain on their own.
6.1.3. Protection of Collateral. Neither Agent nor any Lender shall
------------------------
be liable or responsible in any way for the safekeeping of any of the
Collateral or for any loss or damage thereto (except for reasonable
care in the custody thereof while any Collateral is in Agent's or any
Lender's actual possession) or for any diminution in the value thereof,
or for any act or default of any warehouseman, carrier, forwarding
agency, or other person whomsoever, but the same shall be at Borrowers'
sole risk.
6.2. Administration of Accounts.
--------------------------
6.2.1. Records, Schedules and Assignments of Accounts. Each Borrower
----------------------------------------------
shall keep accurate and complete records of its Accounts and all
payments and collections thereon and shall submit to Agent on such
periodic basis as Agent shall request a sales and collections report
for the preceding period, in form acceptable to Agent. Concurrently
with the delivery of each Borrowing Base Certificate described in
subsection 8.1.4, or more frequently as reasonably requested by Agent,
from and after the date hereof, Borrowers shall deliver to Agent a
detailed aged trial balance of all of each Borrower's Accounts,
specifying the names, addresses, face values, dates of invoices and due
dates for each Account Debtor obligated on an Account so listed
("Schedule of Accounts"), and upon Agent's request therefor, copies of
proof of delivery and the original copy of all documents, including,
without limitation, repayment histories and present status reports
relating to the Accounts so scheduled and such other matters and
information relating to the status of then existing Accounts as Agent
shall reasonably request.
6.2.2. Discounts, Allowances, Disputes. If a Borrower grants any
-------------------------------
discounts, allowances or credits that are not shown on the face of the
invoice for the Account involved, such Borrower shall report such
discounts, allowances or credits, as the case may be, to Agent as part
of the next required Schedule of Accounts.
6.2.3. Account Verification. Any of Agent's officers, employees or
--------------------
agents shall have the right, at any time or times hereafter, in the
name of Agent, any designee of Agent or a Borrower, to verify the
validity, amount or any other matter relating to any Accounts by mail,
telephone, electronic communication or otherwise. Each Borrower shall
cooperate fully with Agent in an effort to facilitate and promptly
conclude any such verification process.
6.2.4. Maintenance of Dominion Account. Each Borrower shall maintain
-------------------------------
a Dominion Account or Accounts pursuant to lockbox and blocked account
arrangements acceptable to Agent with such banks as may be selected by
such Borrower and be reasonably acceptable to Agent. Each Borrower
shall issue to any such banks an irrevocable letter of instruction
directing such banks to deposit all payments or other remittances
received in the lockbox and blocked accounts to the Dominion Account
for application on account of the Obligations as provided in
-36-
subsection 3.2.1. All funds deposited in any Dominion Account shall
immediately become the property of Agent, for the ratable benefit of
Lenders as provided in this Agreement, and each Borrower shall obtain
the agreement by the applicable banks in favor of Agent to waive any
recoupment, setoff rights, and any security interest in, or against,
the funds so deposited. Agent assumes no responsibility for such
lockbox and blocked account arrangements, including, without
limitation, any claim of accord and satisfaction or release with
respect to deposits accepted by any bank thereunder.
6.2.5. Collection of Accounts, Proceeds of Collateral. Each Borrower
----------------------------------------------
agrees that all invoices rendered and other requests made by such
Borrower for payment in respect of Accounts shall contain a written
statement directing payment in respect of such Accounts to be paid to a
lockbox established pursuant to subsection 6.2.4. To expedite
collection, each Borrower shall endeavor in the first instance to make
collection of its Accounts for Agent. All remittances received by each
Borrower on account of Accounts, together with the proceeds of any
other Collateral, shall be held as Agent's property, for its benefit
and the benefit of Lenders as provided in this Agreement, by such
Borrower as trustee of an express trust for Agent's benefit and such
Borrower shall immediately deposit same in kind in the Dominion
Account. Agent retains the right at all times after the occurrence and
during the continuance of an Event of Default to notify Account Debtors
that each Borrower's Accounts have been assigned to Agent and to
collect each Borrower's Accounts directly in its own name, or in the
name of Agent's agent, and to charge the collection costs and expenses,
including attorneys' fees, jointly and severally to Borrowers.
6.2.6. Taxes. If an Account includes a charge for any tax payable
-----
to any governmental taxing authority, Agent is authorized, in its sole
discretion, to pay the amount thereof to the proper taxing authority
for the account of the applicable Borrower and to charge any Borrower
therefor, except for taxes that (i) are being actively contested in
good faith and by appropriate proceedings and with respect to which the
applicable Borrower maintains reasonable reserves on its books therefor
and (ii) would not reasonably be expected to result in any Lien other
than a Permitted Lien. In no event shall Agent or any Lender be liable
for any taxes to any governmental taxing authority that may be due by
any Borrower.
6.3. Administration of Inventory.
---------------------------
Each Borrower shall keep records of its Inventory which records
shall be complete and accurate in all material respects. Each Borrower
shall furnish to Agent monthly Inventory reports on the fifth day of
each calendar month, for the preceding month, or more frequently as
reasonably requested by Agent, which reports will be in such other format
and detail as Agent shall reasonably request and shall include a current
list of all locations of such Borrower's Inventory. Each Borrower shall have
put into operation a fully costed perpetual Inventory system reasonably
acceptable to Agent with respect to its finished goods Inventory on or
before October 31, 2003. Each Borrower shall conduct a physical inventory no
less frequently than annually (provided, that until Borrowers have in place
a fully costed perpetual
-37-
inventory system with respect to finished goods Inventory, Borrowers shall
conduct a physical inventory observation no less frequently than monthly)
and shall provide to Agent a report based on each such physical inventory
promptly thereafter, together with such supporting information as Agent
shall reasonably request.
6.4. Records and Schedules of Equipment.
----------------------------------
Each Borrower shall keep records of its Equipment which shall
be complete and accurate in all material respects itemizing and
describing the kind, type, quality, quantity and book value of its Equipment
and all dispositions made in accordance with subsection 8.2.9 hereof, and
each Borrower shall, and shall cause each of its Domestic Subsidiaries to,
furnish Agent with a current schedule containing the foregoing information
on at least an annual basis and more often (but, unless an Event of Default
is in existence, not more frequently than once per calendar quarter) if
reasonably requested by Agent. Promptly after the request therefor by Agent,
each Borrower shall deliver to Agent any and all evidence of ownership, if
any, of any of its Equipment.
6.5. Payment of Charges.
------------------
All amounts chargeable to any Borrower under Section 6 hereof shall be
Obligations secured by all of the Collateral, shall be payable on demand and
shall bear interest from the date such advance was made until paid in full
at the rate applicable to Base Rate Revolving Portions from time to time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1. General Representations and Warranties.
--------------------------------------
To induce Agent and each Lender to enter into this Agreement and to
make advances hereunder, each Borrower warrants, represents and covenants to
Agent and each Lender, on a joint and several basis, that:
7.1.1. Qualification. Each Borrower and each of its Subsidiaries is a
-------------
corporation, limited partnership or limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization. Each Borrower and
each of its Subsidiaries is duly qualified and is authorized to do
business and is in good standing as a foreign limited liability
company, limited partnership or corporation, as applicable, in (a) as
of the date hereof, each state or jurisdiction listed on Exhibit 7.1.1
-------------
hereto and (b) all states and jurisdictions in which the failure of
such Borrower or any of its Subsidiaries to be so qualified could
reasonably be expected to have a Material Adverse Effect.
7.1.2. Power and Authority. Each Borrower and each of its Domestic
-------------------
Subsidiaries is duly authorized and empowered to enter into, execute,
deliver and perform this Agreement and each of the other Loan Documents
to which it is a party. The execution, delivery and performance of this
Agreement and each of the other Loan Documents have been duly
authorized by all necessary corporate or other
-38-
relevant action and do not and will not (i) require any consent or
approval of the shareholders of such Borrower or any of the
shareholders, partners or members, as the case may be, of any
Subsidiary of such Borrower (other than any such consents or approvals
which have been obtained); (ii) contravene such Borrower's or any of
its Subsidiaries' charter, articles or certificate of incorporation,
partnership agreement, certificate of formation, by-laws, limited
liability agreement, operating agreement or other organizational
documents (as the case may be); (iii) violate, or cause such Borrower
or any of its Subsidiaries to be in default under, any provision of any
law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award in effect having applicability to such Borrower
or any of its Subsidiaries, the violation of which could reasonably be
expected to have a Material Adverse Effect; (iv) result in a breach of
or constitute a default under any indenture or loan or credit agreement
or any other agreement, lease or instrument to which such Borrower or
any of its Subsidiaries is a party or by which it or its Properties may
be bound or affected, including without limitation any Subordinated
Note Document, the breach of or default under which could reasonably be
expected to have a Material Adverse Effect; or (v) result in, or
require, the creation or imposition of any Lien (other than Permitted
Liens) upon or with respect to any of the Properties now owned or
hereafter acquired by such Borrower or any of its Subsidiaries.
7.1.3. Legally Enforceable Agreement. This Agreement is, and each of
-----------------------------
the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of each Borrower and each of its
Domestic Subsidiaries party thereto, enforceable against it in
accordance with its respective terms.
7.1.4. Capital Structure. Exhibit 7.1.4 hereto states, as of the date
----------------- -------------
hereof, (i) the correct name of each of the Subsidiaries of each
Borrower, its jurisdiction of incorporation or organization and the
percentage of its Voting Stock owned by such Borrower, (ii) the name of
each Borrower's and each of its Subsidiaries' corporate or joint
venture Affiliates and the nature of the relationship, (iii) the
number, nature and holder of all outstanding Securities of each
Borrower and of each Subsidiary of such Borrower and (iv) the number of
authorized, issued and treasury Securities of each Borrower. Each
Borrower has good title to all of the Securities it purports to own of
each of such Subsidiaries, free and clear in each case of any Lien
other than Permitted Liens. All such Securities have been duly issued
and are fully paid and non-assessable. As of the date hereof, there are
no outstanding options to purchase, or any rights or warrants to
subscribe for, or any commitments or agreements to issue or sell any
Securities or obligations convertible into, or any powers of attorney
relating to any Securities of any Borrower or any of its Subsidiaries.
Except as set forth on Exhibit 7.1.4, as of the date hereof, there are
-------------
no outstanding agreements or instruments binding upon any of any
Borrower's or any of its Subsidiaries' partners, members or
shareholders, as the case may be, relating to the ownership of its
Securities.
7.1.5. Names; Organization. As of the date hereof, neither any
-------------------
Borrower nor any of its Subsidiaries has been known as or has used any
legal, fictitious or trade
-39-
names except those listed on Exhibit 7.1.5 hereto. Except as set forth
-------------
on Exhibit 7.1.5, as of the date hereof, during the ten-year period
-------------
preceding the date hereof, neither any Borrower nor any of its
Subsidiaries has been the surviving entity of a merger or consolidation
or has acquired all or substantially all of the assets of any Person.
As of the date hereof, each Borrower's and each of its Subsidiaries'
state(s) of incorporation or organization, Type of Organization and
Organizational I.D. Number is set forth on Exhibit 7.1.5. As of the
-------------
date hereof, the exact legal name of each Borrower and each of its
Subsidiaries is set forth on Exhibit 7.1.5.
-------------
7.1.6. Business Locations; Agent for Process. Each Borrower's and
-------------------------------------
each of its Subsidiary's chief executive office, location of books and
records and other places of business are as listed on Exhibit 6.1.1
-------------
hereto, as updated from time to time by Borrowers in accordance with
the provisions of subsection 6.1.1. During the one-year period
preceding the date hereof, neither any Borrower nor any of its
Subsidiaries has had an office, place of business or agent for service
of process, other than as listed on Exhibit 6.1.1. All tangible
-------------
Collateral is and will at all times be kept by a Borrower and its
Subsidiaries in accordance with subsection 6.1.1. Except as shown on
Exhibit 6.1.1, as of the date hereof, no Inventory is stored with a
-------------
bailee, processor, distributor, warehouseman or similar party, nor is
any Inventory consigned to any Person. At no time is Inventory of
Borrowers and the Subsidiaries with an aggregate value in excess of
$750,000 located with third party processors.
7.1.7. Title to Properties; Priority of Liens. Each Borrower and each
--------------------------------------
of its Subsidiaries has good, indefeasible and marketable title to and
fee simple ownership of, or valid and subsisting leasehold interests
in, all of its real Property, and good title to all of the Collateral
and all of its other Property, in each case, free and clear of all
Liens except Permitted Liens. Each Borrower and each of its
Subsidiaries has paid or discharged all lawful claims which, if unpaid,
might become a Lien against any of such Borrower's or such Subsidiary's
Properties that is not a Permitted Lien, except for claims being
contested in good faith by appropriate proceedings diligently conducted
and for which adequate reserves have been provided in accordance with
GAAP, unless Agent has determined that such claims could reasonably be
expected to materially and adversely effect the Collateral or the value
thereof. The Liens granted to Agent under Section 5 hereof are first
priority Liens, subject only to Permitted Liens.
7.1.8. Accounts. Agent may rely, in determining which Accounts are
--------
Eligible Accounts, on all statements and representations made by each
Borrower with respect to any Account or Accounts. With respect to each
of each Borrower's Accounts arising in the ordinary course of business
from the sale of goods or the rendition of services, whether or not
such Account is an Eligible Account, unless otherwise disclosed to
Agent in writing:
(i) It is genuine and in all respects what it purports
to be, and it is not evidenced by a judgment;
-40-
(ii) It arises out of a completed, bona fide sale and
---- ----
delivery of goods or rendition of services by such Borrower, in the
ordinary course of its business and in accordance with the terms and
conditions of all purchase orders, contracts or other documents
relating thereto and forming a part of the contract between such
Borrower and the Account Debtor;
(iii) It is for a liquidated amount maturing as stated in
the duplicate invoice covering such sale or rendition of services,
a copy of which has been furnished or is available to Agent;
(iv) To the best of such Borrower's knowledge, there are
no facts, events or occurrences which in any way impair the validity
or enforceability of any Accounts or tend to reduce the amount payable
thereunder from the face amount of the invoice and statements
delivered or made available to Agent with respect thereto;
(v) To the best of such Borrower's knowledge, the Account
Debtor thereunder (1) had the capacity to contract at the time any
contract or other document giving rise to the Account was executed
and (2) such Account Debtor is Solvent; and
(vi) To the best of such Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against the
Account Debtor thereunder which might result in any material adverse
change in such Account Debtor's financial condition or the
collectibility of such Account.
7.1.9. Equipment. The Equipment of each Borrower and its Subsidiaries
---------
is in good operating condition and repair, and all necessary
replacements of and repairs thereto shall be made so that the operating
efficiency thereof shall be maintained and preserved, reasonable wear
and tear excepted. Neither any Borrower nor any of its Domestic
Subsidiaries will permit any Equipment to become affixed to any real
Property leased to any Borrower or any of its Domestic Subsidiaries so
that an interest arises therein under the real estate laws of the
applicable jurisdiction unless the landlord of such real Property has
executed a landlord waiver or leasehold mortgage in favor of and in
form reasonably acceptable to Agent, and no Borrower will permit any of
the Equipment of any Borrower or any of its Domestic Subsidiaries to
become an accession to any personal Property other than Equipment that
is subject to first priority (except for Permitted Liens) Liens in
favor of Agent.
7.1.10. Financial Statements; Fiscal Year. The Consolidated and
---------------------------------
consolidating (showing all Borrowers and Domestic Subsidiaries as a
Consolidated entity and the Foreign Subsidiaries on a consolidating
basis) balance sheets of Falcon and its Subsidiaries (including the
accounts of all Subsidiaries of Falcon and their respective
Subsidiaries for the respective periods during which a Subsidiary
relationship existed) as of April 5, 2003, and the related statements
of income, changes in shareholder's equity, and changes in financial
position for the periods
-41-
ended on such dates, have been prepared in accordance with GAAP, and
present fairly in all material respects the financial positions of
Falcon and such Persons, taken as a whole, at such dates and the
results of Falcon's and such Person's operations, taken as a whole, for
such periods. As of the date hereof, since February 1, 2003, there has
been no material adverse change in the financial position of Falcon and
such other Persons, taken as a whole, as reflected in the Consolidated
balance sheet as of such date. As of the date hereof, the fiscal year
of Falcon and each of its Subsidiaries ends on the Saturday closest to
October 31st of each year.
7.1.11. Full Disclosure. The financial statements referred to in
---------------
subsection 7.1.10 hereof do not, nor does this Agreement or any other
written statement of any Borrower to Agent or any Lender contain any
untrue statement of a material fact or omit a material fact necessary
to make the statements contained therein or herein not misleading.
There is no fact which any Borrower has failed to disclose to Agent or
any Lender in writing which could reasonably be expected to have a
Material Adverse Effect.
7.1.12. Solvent Financial Condition. Each Borrower and each of its
---------------------------
Subsidiaries is, as of the date hereof, and, after giving effect to the
initial Loans to be made and the initial Letters of Credit and LC
Guaranties to be issued hereunder and all related transactions, will
be, Solvent.
7.1.13. Surety Obligations. Except as set forth on Exhibit 7.1.13, as
------------------ --------------
of the date hereof, neither any Borrower nor any of its Subsidiaries is
obligated as surety or indemnitor under any surety or similar bond or
other contract or has issued or entered into any agreement to assure
payment, performance or completion of performance of any undertaking or
obligation of any Person.
7.1.14. Taxes. As of the date hereof, the federal tax identification
-----
number of each Borrower and Domestic Subsidiary of each Borrower is
shown on Exhibit 7.1.14 hereto. Each Borrower and each of its
--------------
Subsidiaries has filed all federal, state and local tax returns and
other reports relating to taxes it is required by law to file, other
than returns and reports with respect to taxes in an aggregate amount
not in excess of $250,000 at any time, and has paid, or made provision
for the payment of, all taxes, assessments, fees, levies and other
governmental charges upon it, its income and Properties as and when
such taxes, assessments, fees, levies and charges are due and payable,
unless and to the extent any thereof are being actively contested in
good faith and by appropriate proceedings and each Borrower and each of
its Subsidiaries maintains reasonable reserves on its books therefor,
other than taxes in an aggregate amount not in excess of $250,000 at
any time. The provision for taxes on the books of each Borrower and its
Subsidiaries is adequate for all years not closed by applicable
statutes, and for the current fiscal year.
7.1.15. Brokers. Except as shown on Exhibit 7.1.15 hereto, there are
------- --------------
no claims for brokerage commissions, finder's fees or investment banking
fees payable by Borrowers in connection with the transactions
contemplated by this Agreement.
-42-
7.1.16. Patents, Trademarks, Copyrights and Licenses. Each Borrower and
--------------------------------------------
each of its Subsidiaries owns, possesses or licenses or has the right
to use all the patents, trademarks, service marks, trade names,
copyrights, licenses and other Intellectual Property necessary for the
present and planned future conduct of its business without any known
conflict with the rights of others, except for such conflicts as could
not reasonably be expected to have a Material Adverse Effect. All such
patents, trademarks, service marks, tradenames, copyrights, licenses,
and other similar rights as of the date hereof are listed on Exhibit
-------
7.1.16 hereto. As of the date hereof, no claim has been asserted to any
------
Borrower or any of its Subsidiaries which is currently pending that
their use of their Intellectual Property or the conduct of their
business does or may infringe upon the Intellectual Property rights of
any third party. To the knowledge of each Borrower and except as set
forth on Exhibit 7.1.16 hereto, as of the date hereof, no Person is
--------------
engaging in any activity that infringes in any material respect upon
any Borrower's or any of its Subsidiaries material Intellectual
Property. Except as set forth on Exhibit 7.1.16, each Borrower's and
--------------
each of its Subsidiary's (i) material United States trademarks, service
marks, and copyrights are registered with the U.S. Patent and Trademark
Office or in the U.S. Copyright Office, as applicable and (ii) material
license agreements and similar arrangements relating to its Inventory
(1) permits, and does not restrict, the assignment by any Borrower or
any of its Domestic Subsidiaries to Agent, or any other Person
designated by Agent, of all of such Borrower's or such Domestic
Subsidiary's, as applicable, rights, title and interest pertaining to
such license agreement or such similar arrangement and (2) would permit
the continued use by such Borrower or such Domestic Subsidiary, or
Agent or its assignee, of such license agreement or such similar
arrangement and the right to sell Inventory subject to such license
agreement for a period of no less than six (6) months after a default
or breach of such agreement or arrangement. The consummation and
performance of the transactions and actions contemplated by this
Agreement and the other Loan Document, including without limitation,
the exercise by Agent of any of its rights or remedies under Section
10, will not result in the termination or impairment of any Borrower's
or any Subsidiary's ownership or rights relating to its Intellectual
Property, except for such Intellectual Property rights the loss or
impairment of which could not reasonably be expected to have a Material
Adverse Effect. Except as listed on Exhibit 7.1.16 and except as could
--------------
not reasonably be expected to have a Material Adverse Effect, (i)
neither any Borrower nor any of its Subsidiaries is in breach of, or
default under, any term of any license or sublicense with respect to
any of its Intellectual Property and (ii) to the knowledge of each
Borrower, no other party to such license or sublicense is in breach
thereof or default thereunder, and such license is valid and
enforceable.
7.1.17. Governmental Consents. Each Borrower and each of its
---------------------
Subsidiaries has, and is in good standing with respect to, all
governmental consents, approvals, licenses, authorizations, permits,
certificates, inspections and franchises necessary to continue to
conduct its business as heretofore or proposed to be conducted by it
and to own or lease and operate its Properties as now owned or leased
by it, except where
-43-
the failure to possess or so maintain such rights could not reasonably
be expected to have a Material Adverse Effect.
7.1.18. Compliance with Laws. Each Borrower and each of its
--------------------
Subsidiaries has duly complied, and its Properties, business operations
and leaseholds are in compliance with, the provisions of all federal,
state and local laws, rules and regulations applicable to such Borrower
or such Subsidiary, as applicable, its Properties or the conduct of its
business, except for such non-compliance as could not reasonably be
expected to have a Material Adverse Effect, and there have been no
citations, notices or orders of noncompliance issued to any Borrower or
any of its Subsidiaries under any such law, rule or regulation, except
where such noncompliance could not reasonably be expected to have a
Material Adverse Effect. Each Borrower and each of its Subsidiaries has
established and maintains an adequate monitoring system to insure that
it remains in compliance in all material respects with all federal,
state and local rules, laws and regulations applicable to it. No
Inventory has been produced in violation of the Fair Labor Standards
Act (29 U.S.C. section 201 et seq.), as amended.
-- ---
7.1.19. Restrictions. Neither any Borrower nor any of its Subsidiaries
------------
is a party or subject to any contract or agreement which restricts its
right or ability to incur Indebtedness, other than as set forth on
Exhibit 7.1.19 hereto, none of which prohibit the execution of or
--------------
compliance with this Agreement or the other Loan Documents by any
Borrower or any of its Subsidiaries, as applicable.
7.1.20. Litigation. Except as set forth on Exhibit 7.1.20 hereto, there
---------- --------------
are no actions, suits, proceedings or investigations pending, or to the
knowledge of each Borrower, threatened, against or affecting any
Borrower or any of its Subsidiaries, or the business, operations,
Properties, prospects, profits or condition of any Borrower or any of
its Subsidiaries which, singly or in the aggregate, could reasonably be
expected to have a Material Adverse Effect. Neither any Borrower nor
any of its Subsidiaries is in default with respect to any order, writ,
injunction, judgment, decree or rule of any court, governmental
authority or arbitration board or tribunal, which, singly or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect.
7.1.21. No Defaults. No event has occurred and no condition exists
-----------
which would, upon or after the execution and delivery of this Agreement
or any Borrower's performance hereunder, constitute a Default or an
Event of Default. Except as described on Exhibit 7.1.21, neither any
--------------
Borrower nor any of its Subsidiaries is in default in (and no event has
occurred and no condition exists which constitutes, or which the
passage of time or the giving of notice or both would constitute, a
default in) the payment of any Indebtedness to any Person for Money
Borrowed in excess of $500,000.
7.1.22. Leases. Exhibit 7.1.22 hereto is a complete listing of all
------ --------------
capitalized and operating personal property leases of each Borrower and
its Subsidiaries and all real property leases of each Borrower and its
Subsidiaries, in each case as of the date
-44-
hereof. Each Borrower and each of its Subsidiaries is in full
compliance with all of the terms of each of its respective capitalized
and operating leases, except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect.
7.1.23. Pension Plans. As of the date hereof, except as disclosed on
-------------
Exhibit 7.1.23 hereto, neither any Borrower nor any of its Subsidiaries
--------------
has any Plan. Each Borrower and each of its Subsidiaries is in
compliance with the requirements of ERISA and the regulations
promulgated thereunder with respect to each Plan, except where the
failure to so comply could not reasonably be expected to have a
Material Adverse Effect. No fact or situation that could reasonably be
expected to result in a material adverse change in the financial
condition of Borrowers and their Subsidiaries taken as a whole exists
in connection with any Plan. Neither any Borrower nor any of its
Subsidiaries has any withdrawal liability in connection with a
Multiemployer Plan.
7.1.24. Trade Relations. There exists no actual or, to each Borrower's
---------------
knowledge, threatened termination, cancellation or limitation of, or
any modification or change in, the business relationship between any
Borrower or any of its Subsidiaries and any customer or any group of
customers whose purchases individually or in the aggregate are material
to the business of such Borrower and its Subsidiaries, or with any
material supplier, except in each case, where the same could not
reasonably be expected to have a Material Adverse Effect, and there
exists no present condition or state of facts or circumstances which
would prevent any Borrower or any of its Subsidiaries from conducting
such business after the consummation of the transactions contemplated
by this Agreement in substantially the same manner in which it has
heretofore been conducted.
7.1.25. Labor Relations. Except as described on Exhibit 7.1.25 hereto,
--------------- --------------
as of the date hereof, neither any Borrower nor any of its Subsidiaries
is a party to any collective bargaining agreement. There are no
material grievances, disputes or controversies with any union or any
other organization of any Borrower's or any of its Subsidiaries
employees, or threats of strikes, work stoppages or any asserted
pending demands for collective bargaining by any union or organization,
except those that could not reasonably be expected to have a Material
Adverse Effect.
7.1.26. Common Enterprise. Borrowers are engaged in the businesses of
-----------------
the manufacturing of furniture for the commercial market, as well as in
certain other businesses. These operations require financing on a basis
such that the credit supplied can be made available from time to time
to Borrowers, as required for the continued successful operation of
Borrowers taken as a whole. Borrowers have requested the Lenders to
make credit available hereunder for the purposes set forth herein and
generally for the purposes of financing the operations of Borrowers.
Each Borrower and each Subsidiary of each Borrower expects to derive
benefit (and the Board of Directors of each Borrower and each
Subsidiary of each Borrower has determined that such Borrower or
Subsidiary may reasonably be expected to derive benefit), directly or
indirectly, from a portion of the credit extended by Lenders hereunder,
-45-
both in its separate capacity and as a member of the group of
companies, since the successful operation and condition of each
Borrower and each Subsidiary of each Borrower is dependent on the
continued successful performance of the functions of the group as a
whole. Each Borrower acknowledges that, but for the agreement of each
of the other Borrowers to execute and deliver this Agreement, Agent and
Lenders would not have made available the credit facilities established
hereby on the terms set forth herein.
7.1.27. Disclosures re: Subordinated Note Indenture. As of the Closing
-------------------------------------------
Date, (a) all Restricted Subsidiaries and all Unrestricted Subsidiaries
are listed on Exhibit 7.1.27 hereto, (b) all Subordinated Note
--------------
Guarantors are listed on Exhibit 7.1.27, (c) the aggregate amount
--------------
applied by Borrowers and their Subsidiaries during the period
commencing on June 17, 1999 and ending on the Closing Date to
permanently repay Indebtedness for Money Borrowed (and, if any such
Indebtedness was revolving credit Indebtedness, to reduce commitments
with respect thereto) under a Credit Facility as a result of asset
dispositions is $150,500, and such reductions are described on
Exhibit 7.1.27 and (d) the aggregate amount of investments made in
--------------
Foreign Subsidiaries during the period commencing on June 17, 1999 and
ending on the Closing Date is 100 Hong Kong Dollars, and such
Investments are described on Schedule 7.1.27. Except as described on
---------------
Exhibit 7.1.27, (i) other than the loan facilities evidenced by this
--------------
Agreement, there are no Credit Facilities in existence, (ii) other than
the Obligations, there is no Designated Senior Debt in existence and
(iii) this Agreement constitutes the Credit Agreement for purposes of
the Subordinated Note Indenture and the Obligations constitute a Credit
Facility and Designated Senior Debt for purposes of the Subordinated
Note Indenture.
7.1.28. Non-Operating Subsidiaries. As of the date hereof, none of
--------------------------
Shelby FSC Corp., Madison Furniture Industries, Inc., Thonet
International (UK) Limited, Fundiciones Tecnicas, S.A., Falcon de Baja
California, S.A. de C.V., The Falcon Companies International, Inc., The
Falcon Companies HK Limited, or Falcon Holdings, Inc., each a
Subsidiary of Falcon, has any material assets, operations, business,
liabilities or contingent liabilities.
7.2. Continuous Nature of Representations and Warranties.
---------------------------------------------------
Each representation and warranty contained in this Agreement and the
other Loan Documents shall be continuous in nature and shall remain
accurate, complete and not misleading in all material respects at all times
during the term of this Agreement, except for changes in the nature of a
Borrower's or one of such Borrower's Subsidiary's business or operations
that would render the information in any exhibit attached hereto or to any
other Loan Document either inaccurate, incomplete or misleading, so long as
Majority Lenders or Required Lenders, as applicable pursuant to subsection
11.10, have consented to such changes or such changes are expressly
permitted by this Agreement and except to the extent that such
representations and warranties relate solely to an earlier date. Without
limiting the generality of the foregoing, each Loan request made or deemed
made pursuant to subsection 3.1.1 hereof shall constitute each Borrower's
reaffirmation, as of the date of each such Loan request, of each
-46-
representation, warranty or other statement made or furnished to Agent or
any Lender by or on behalf of any Borrower, Subsidiary of such Borrower, or
any Guarantor in this Agreement, any of the other Loan Documents, or any
instrument, certificate or financial statement furnished in compliance with
or in reference thereto, except to the extent that such representations and
warranties relate solely to an earlier date.
7.3. Survival of Representations and Warranties.
------------------------------------------
All representations and warranties of each Borrower contained in this
Agreement or any of the other Loan Documents shall survive the execution,
delivery and acceptance thereof by Agent and each Lender and the parties
thereto and the closing of the transactions described therein or related
thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1. Affirmative Covenants.
---------------------
During the Term, and thereafter for so long as there are any
Obligations outstanding, Borrowers jointly and severally covenant that they
shall:
8.1.1. Visits and Inspections; Lender Meeting. Permit (i)
--------------------------------------
representatives of Agent, accompanied by representatives of Tranche B
Agent, and during the continuation of any Event of Default, accompanied
by representatives of any Lender, from time to time, as often as may be
reasonably requested, but only during normal business hours, to visit
and inspect the Properties of each Borrower and each of its
Subsidiaries, inspect, audit and make extracts from its books and
records, and discuss with its officers, its employees and its
independent accountants, each Borrower's and each of its Subsidiaries'
business, assets, liabilities, financial condition, business prospects
and results of operations and (ii) appraisers engaged pursuant to
Section 2.10 (whether or not personnel of Agent or Tranche B Agent),
from time to time, as often as may be reasonably requested, but only
during normal business hours, to visit and inspect the Properties of
each Borrower and each of its Subsidiaries, for the purpose of
completing appraisals pursuant to Section 2.10. Agent or such Lender,
if no Default or Event of Default then exists, shall give the
applicable Borrower reasonable prior notice of any such inspection or
audit. Without limiting the foregoing, Borrowers will participate and
will cause their key management personnel to participate in meetings
with Agent and Tranche B Agent and, at Borrower's request, Lenders,
periodically during each year, which meeting(s) shall be held at such
times and such places as may be reasonably requested by Agent and
Tranche B Agent.
8.1.2. Notices. Promptly notify Agent and Tranche B Agent in writing
-------
of the occurrence of any event or the existence of any fact which renders
any representation or warranty in this Agreement or any of the other
Loan Documents inaccurate, incomplete or misleading in any material
respect as of the date made or remade. In addition, each Borrower
agrees to provide Agent and Tranche B Agent
-47-
with prompt written notice of any change in the information disclosed
in any Exhibit hereto, in each case after giving effect to the
materiality limits and Material Adverse Effect qualifications contained
therein.
8.1.3. Financial Statements. Keep, and cause each Subsidiary to keep,
--------------------
adequate records and books of account with respect to its business
activities in which proper entries are made in accordance with
customary accounting practices reflecting all its financial
transactions; and cause to be prepared and furnished to Agent and each
Lender, the following, all to be prepared in accordance with GAAP
applied on a consistent basis, unless Borrowers' certified public
accountants concur in any change therein and such change is disclosed
to Agent and Lenders and is consistent with GAAP:
(i) not later than ninety (90) days after the close of
each fiscal year of Borrowers, unqualified (except for a qualification
for a change in accounting principles with which the accountant
concurs) audited financial statements of Borrowers and the Subsidiaries
as of the end of such year, on a Consolidated basis, certified by a
firm of independent certified public accountants of recognized national
standing selected by Borrowers but reasonably acceptable to Agent and,
within a reasonable time thereafter a copy of any management letter
issued in connection therewith;
(ii) not later than thirty (30) days after the end of each
fiscal month hereafter, including the last fiscal month of each fiscal
year of Borrowers, unaudited interim financial statements of Borrowers
and the Subsidiaries as of the end of such fiscal month and of the
portion of the fiscal year then elapsed, on a Consolidated and
consolidating basis (showing all Borrowers and Domestic Subsidiaries as
a Consolidated entity and the Foreign Subsidiaries on a consolidating
basis), certified by the chief financial officer of Falcon as prepared
in accordance with GAAP and fairly presenting in all material respects
the financial position and results of operations of Borrowers and the
Subsidiaries for such fiscal month and period subject only to changes
from audit and year-end adjustments and except that such statements
need not contain notes;
(iii) together with each delivery of financial statements
pursuant to clauses (i) and (ii) of this subsection 8.1.3, a management
report (1) setting forth in comparative form the corresponding figures
for the corresponding periods of the previous fiscal year and the
corresponding figures from the most recent Projections for the current
fiscal year delivered pursuant to subsection 8.1.6 and (2) identifying
the reasons for any significant variations. The information above shall
be presented in reasonable detail and shall be certified by the chief
financial officer of Falcon to the effect that such information fairly
presents in all material respects the results of operation and
financial condition of Borrowers and the Subsidiaries as at the dates
and for the periods indicated;
-48-
(iv) promptly after the sending or filing thereof, as the
case may be, copies of any proxy statements, financial statements or
reports which any Borrower or any Subsidiary has made available to its
Securities holders and copies of any regular, periodic and special
reports or registration statements which any Borrower or any Subsidiary
files with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor, or any national securities
exchange;
(v) upon request of Agent, copies of any annual report to
be filed with ERISA in connection with each Plan; and
(vi) such other data and information (financial and
otherwise) as Agent or any Lender, from time to time, may reasonably
request, bearing upon or related to the Collateral or any Borrower's or
any Subsidiary's financial condition or results of operations.
Concurrently with the delivery of the financial statements
described in clause (i) of this subsection 8.1.3, Borrowers shall
forward to Agent and Tranche B Agent a copy of the accountants' letter
to any Borrowers' management that is prepared in connection with such
financial statements. Concurrently with the delivery of the financial
statements described in paragraph (i) and (ii) of this subsection
8.1.3, Borrowers shall cause to be prepared and furnished to Agent and
Tranche B Agent a Compliance Certificate in the form of Exhibit 8.1.3
-------------
hereto executed by the chief financial officer of Falcon (a "Compliance
Certificate").
8.1.4. Borrowing Base Certificates. On or before the second Business
---------------------------
Day of each week from and after the date hereof, Borrowers shall
deliver to Agent and Tranche B Agent, in form acceptable to Agent, a
Borrowing Base Certificate as of the last day of the immediately
preceding week, accompanied by weekly backlog reports and such
supporting materials as Agent shall reasonably request from time to
time. If Borrowers deem it advisable, or if Agent shall request,
Borrowers shall execute and deliver to Agent Borrowing Base
Certificates more frequently than weekly.
8.1.5. Landlord, Processor and Storage Agreements. Provide Agent with
------------------------------------------
copies of all agreements between any Borrower or any Domestic
Subsidiary and any landlord, processor, distributor, warehouseman or
consignee which owns any premises at which any Collateral may, from
time to time, be kept. In respect of any lease or warehousing
arrangement existing on or entered into by a Borrower or a Domestic
Subsidiary after the Closing Date (other than leases for showrooms or
sales offices), Borrowers shall provide Agent with landlord waivers or
bailee letters with respect to such leased premises. Such landlord
waivers or bailee letters shall be in a form supplied by Agent to
Borrowers with such reasonable revisions as are customarily accepted by
Agent or by similar financial institutions in similar financing
transactions.
-49-
8.1.6. Projections. No later than the last day of each fiscal year of
-----------
Borrowers, deliver to Agent and Tranche B Agent Projections of
Borrowers and the Subsidiaries for the forthcoming fiscal year, month
by month, which shall be prepared on a Consolidated basis and
consistent with Borrowers' year-end financial statements, and which
shall include, without limitation, a balance sheet, income statement
and statement of cash flow.
8.1.7. Domestic Subsidiaries. Cause each Domestic Subsidiary, whether
---------------------
now or hereafter in existence, promptly upon Agent's request therefor,
and, in any event, contemporaneously with the formation or acquisition
of any such Domestic Subsidiary formed or acquired after the date
hereof, to execute and deliver to Agent a Guaranty Agreement and a
security agreement pursuant to which such Domestic Subsidiary
guaranties the payment of all Obligations and grants to Agent a first
priority Lien (subject only to Permitted Liens) on all of its
Properties of the types described in Section 5. Additionally, the
applicable Person shall execute and deliver to Agent a Pledge Agreement
pursuant to which such Person grants to Agent a first priority Lien
(subject only to Permitted Liens) with respect to all of the issued and
outstanding Securities of each such Domestic Subsidiary owned by such
Person.
8.1.8. Deposit and Brokerage Accounts. For each deposit account or
------------------------------
brokerage account that any Borrower at any time opens or maintains,
such Borrower shall, at Agent's request and option, contemporaneously
with the opening of such account, pursuant to an agreement in form and
substance reasonably satisfactory to Agent, cause the depository bank
or securities intermediary, as applicable, to agree to comply at any
time with instructions from Agent to such depository bank or securities
intermediary, as applicable, directing the disposition of funds from
time to time credited to such deposit or brokerage account, without
further consent of such Borrower.
8.1.9. Updated Information. Promptly notify Agent in writing of (a)
-------------------
each state or jurisdiction in which any Borrower or any Subsidiary
qualifies to do business after the date hereof, (b) the use by any
Borrower or any Subsidiary of a legal, fictitious or trade name not
listed on Exhibit 7.1.5 hereto, (c) any change after the date hereof in
-------------
the tax identification number of any Borrower or any Domestic
Subsidiary, (d) the ownership by any Borrower or any Subsidiary of any
patent, trademark, service ▇▇▇▇, tradename, copyright, license or other
similar rights not listed on Exhibit 7.1.16, (e) the assertion by any
--------------
Person of a claim against any Borrower or any Subsidiary that its use
of its Intellectual Property or the conduct of its business does or may
infringe upon the Intellectual Property rights of any third party, (f)
any change after the date hereof in the list of capitalized and
operating personal property leases and real property leases of any
Borrower or any Subsidiary listed on Exhibit 7.1.22 hereto, (g) any
--------------
change after the date hereof in the list of Plans listed on
Exhibit 7.1.23 hereto and (h) any change after the date hereof in the
--------------
representation contained in subsection 7.1.28; provided, that Borrowers
--------
shall only be required to provide the foregoing information regarding
the Foreign Subsidiaries at such time as such information becomes known
to a Responsible Officer.
-50-
8.1.10. Invoicing. Within sixty (60) days after the Closing Date,
---------
Borrowers shall, and shall cause each of the Domestic Subsidiaries to,
cause each of its subsequent invoices sent to Account Debtors to
reflect that the issuer thereof and payee thereunder is Falcon.
8.1.11. Czech Stock Pledge. On or before September 14, 2003, take such
------------------
steps as Agent reasonably requires in order to perfect Agent's Lien on
the Securities of Falcon Mimon A/S and deliver to Agent evidence
thereof, together with an opinion of Czech counsel related thereto, in
form and substance reasonably acceptable to Agent.
8.1.12. Mexican and Danish Opinions. Within ten (10) days after the
---------------------------
Closing Date, deliver to Agent opinions of Danish counsel and Mexican
counsel with respect to the Liens granted to Agent on the Securities of
▇▇▇▇ Europe A/S and Falcon ▇▇ ▇▇▇▇▇▇, ▇.▇. de C.V., respectively, each
in form and substance reasonably acceptable to Agent.
8.2. Negative Covenants.
------------------
During the Term, and thereafter for so long as there are any
Obligations outstanding, Borrowers jointly and severally covenant that they
shall not:
8.2.1. Mergers; Consolidations; Acquisitions; Structural Changes.
---------------------------------------------------------
Merge or consolidate, or permit any Subsidiary to merge or consolidate,
with any Person; nor, without giving Agent at least ten (10) days prior
written notice thereof, change its or any Subsidiary's state of
incorporation or organization, Type of Organization or Organizational
I.D. Number; nor, without giving Agent at least ten (10) days prior
written notice thereof, change its or any Subsidiary's legal name; nor
acquire, nor permit any Subsidiary to acquire, all or any substantial
part of the Properties of any Person, except for:
(i) mergers or consolidations of any Borrower (other than
Falcon) or any Domestic Subsidiary of a Borrower into a Borrower or a
wholly-owned Domestic Subsidiary of a Borrower;
(ii) mergers or consolidations of any Foreign Subsidiary of
a Borrower into any other Foreign Subsidiary of a Borrower;
(iii) dissolution or liquidation of any Foreign Subsidiary or
Domestic Subsidiary; and
(iv) acquisitions of assets consisting of fixed assets or
real property that constitute Capital Expenditures permitted under
subsection 8.2.8.
8.2.2. Loans. Make, or permit any Subsidiary to make, any loans or
-----
other advances of money to any Person, including any Foreign
Subsidiary, except:
-51-
(i) salary, travel advances, advances against commissions
and other similar advances to employees in the ordinary course of
business;
(ii) extensions of trade credit in the ordinary course of
business;
(iii) deposits with financial institutions permitted under this
Agreement;
(iv) prepaid expenses and deposits with vendors made in the
ordinary course of business;
(v) loans by a Borrower or a Domestic Subsidiary of a
Borrower to a Borrower or to a Domestic Subsidiary of a Borrower that
is a Guarantor;
(vi) so long as no Event of Default is then in existence,
loans after the date hereof by a Borrower or a Domestic Subsidiary of
a Borrower to a Foreign Subsidiary of a Borrower the Securities of
which are subject to a Pledge Agreement, in an aggregate amount at
any time outstanding for all such Foreign Subsidiaries, together
with all equity investments made by a Borrower or a Domestic
Subsidiary of a Borrower after the date hereof in such Foreign
Subsidiaries, not in excess of $1,000,000 in any fiscal year or
$2,500,000 during the period since the Closing Date; and
(vii) loans by a Foreign Subsidiary of a Borrower to another
Foreign Subsidiary of a Borrower the Securities of which are subject
to a Pledge Agreement.
8.2.3. Total Indebtedness. Create, incur, assume, or suffer to exist,
------------------
or permit any Subsidiary to create, incur or suffer to exist, any
Indebtedness, except:
(i) Obligations owing to Agent or any Lender under this
Agreement or any of the other Loan Documents;
(ii) Indebtedness existing on the date of this Agreement and
listed on Exhibit 8.2.3 and any renewals, extensions, refinancings or
-------------
replacements thereof, but only if (a) the principal amount of such
new Indebtedness does not exceed the principal amount of the
existing Indebtedness at the time of such transaction, and (b) such
new Indebtedness does not contain terms materially more restrictive
to Borrowers and their Subsidiaries than those contained in the
existing Indebtedness;
(iii) Subordinated Debt;
(iv) Permitted Purchase Money Indebtedness;
(v) Permitted Capital Lease Obligations;
-52-
(vi) contingent liabilities arising out of endorsements of
checks and other negotiable instruments for deposit or collection in
the ordinary course of business;
(vii) guaranties of any Indebtedness permitted under this
subsection 8.2.3;
(viii) Indebtedness in respect of intercompany loans permitted
under subsections 8.2.2(v), (vi) and (vii);
(ix) obligations to pay Rentals permitted by subsection
8.2.19;
(x) to the extent not included above, trade payables,
accruals and accounts payable in the ordinary course of business (in
each case to the extent not overdue or being contested in good faith
by appropriate proceedings being diligently conducted) not for Money
Borrowed;
(xi) Indebtedness (other than trade payables, accruals and
accounts payable permitted under clause (x)) of any Foreign Subsidiary
in an aggregate amount for all of the Foreign Subsidiaries not to
exceed $7,500,000 at any time outstanding; and
(xii) Indebtedness not included in paragraphs (i) through
(xi) above, which does not exceed at any time, in the aggregate, the
sum of $500,000.
8.2.4. Affiliate Transactions. Enter into, or be a party to, or permit
----------------------
any Subsidiary to enter into or be a party to, any transaction with any
Affiliate of any Borrower or any holder of more than 5% of the
Securities of any Borrower or any Subsidiary (other than, subject to
the limitations contained in subsections 8.2.2 and 8.2.12, any Borrower
or any Subsidiary), including without limitation any management,
consulting or similar fees, except (i) in the ordinary course of and
pursuant to the reasonable requirements of such Borrower's or such
Subsidiary's business and upon fair and reasonable terms which are
fully disclosed to Agent and are no less favorable to such Borrower or
such Subsidiary than would be obtained in a comparable arms-length
transaction with a Person not an Affiliate or Security holder of such
Borrower, (ii) other Affiliate transactions that are specifically
permitted under other provisions of this Agreement, (iii) the sale of
Inventory by a Borrower or a Borrower's Subsidiary to a Borrower or a
Borrower's Subsidiary, in a manner, at pricing and with payment terms
no more disadvantageous to the applicable Borrower than those currently
in effect, and (iv) as described on Exhibit 8.2.4 hereto.
-------------
8.2.5. Limitation on Liens. Create or suffer to exist, or permit any
-------------------
Subsidiary to create or suffer to exist, any Lien upon any of its
Property, income or profits, whether now owned or hereafter acquired,
except:
(i) Liens at any time granted in favor of Agent for the
benefit of Lenders, pursuant to the priorities provided for herein;
-53-
(ii) Liens for taxes, assessments or governmental charges
(excluding any Lien imposed pursuant to any of the provisions of
ERISA) not yet due, or being contested in the manner described in
subsection 7.1.14 hereto, but only if in Agent's reasonable judgment
such Lien would not reasonably be expected to adversely effect Agent's
rights or the priority of Agent's lien on any Collateral;
(iii) Liens arising in the ordinary course of the business
of such Borrower or any Subsidiary by operation of law or regulation
(such as statutory and common law Liens of landlords, carriers,
warehousemen, mechanics, materialmen and suppliers), but only if
payment in respect of any such Lien is not at the time required (or is
being contested in good faith by appropriate proceedings being
diligently conducted, so long as the aggregate amount of such payments
being so contested does not exceed $250,000) and such Liens do not, in
the aggregate, materially detract from the value of the Property of
such Borrower or any Subsidiary or materially impair the use thereof
in the operation of the business of such Borrower or any Subsidiary;
(iv) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(v) Liens securing Permitted Capital Lease Obligations;
(vi) such other Liens as appear on Exhibit 8.2.5 hereto;
-------------
(vii) Liens incurred or deposits made in the ordinary course
of business in connection with (1) worker's compensation, social
security, unemployment insurance and other like laws or (2) sales
contracts, leases, statutory obligations, work in progress advances,
bids, licenses, surety bonds, performance bonds and other similar
obligations not incurred in connection with the borrowing of money or
the payment of the deferred purchase price of property;
(viii) reservations, covenants, zoning and other land use
regulations, title exceptions or encumbrances granted in the ordinary
course of business, affecting real Property owned or leased by a
Borrower or a Subsidiary; provided, that such exceptions do not in the
--------
aggregate materially interfere with the use of such Property in the
ordinary course of such Borrower's or such Subsidiary's business;
(ix) judgment Liens that do not give rise to an Event of
Default under subsection 10.1.15;
(x) Liens securing Indebtedness of Foreign Subsidiaries
permitted under subsection 8.2.3(xi);
-54-
(xi) Any interest of title of a lessor under, and Liens
arising from financing statements (or equivalent filings, registrations
or agreements in foreign jurisdictions) relating to, leases permitted
by this Agreement;
(xii) Liens of a collection bank arising under the Uniform
Commercial Code (or similar provisions of applicable law) on items in
the course of collection;
(xiii) Liens of sellers of goods to any Borrower or any
Subsidiary arising under Article 2 of the Uniform Commercial Code or
similar provisions of applicable law in the ordinary course of
business, covering only the goods sold and securing only the unpaid
purchase price for such goods and related expenses;
(xiv) leases, licenses or subleases granted to others not
interfering in any material respect with the business of any Borrower
or any Subsidiary, or adversely effecting the Collateral;
(xv) normal and customary rights of setoff upon cash
deposits in favor of banks and other depository institutions (subject
to limitations on such rights contained in any applicable control
agreement or Dominion Account agreement); and
(xvi) such other Liens as Required Lenders may hereafter
approve in writing.
8.2.6. Payments and Amendments of Certain Debt.
---------------------------------------
(i) make or permit any Subsidiary to make any payment of
any part or all of the Subordinated Note Debt or take any other action
or omit to take any other action in respect of the Subordinated Note
Debt, except in accordance with the subordination provisions thereof;
provided, that at no time shall any Borrower or any Subsidiary
--------
(a) make any interest payment in respect of the Subordinated Notes,
except on any "Interest Payment Date" (as defined in the Subordinated
Note Indenture, as in existence on the Closing Date), and then only to
the extent permitted under Articles 8 and 11 of the Subordinated Note
Indenture (as in existence on the Closing Date), (b) make any
redemption of the Subordinated Notes under Article 3 of the
Subordinated Note Indenture (as in existence on the Closing Date),
(c) permit to exist conditions that would require any Borrower or any
Subsidiary to make any "Change of Control Offer" (as defined in the
Subordinated Note Indenture, as in existence on the Closing Date)
pursuant to Section 4.14 of the Subordinated Note Indenture (as in
existence on the Closing Date) or (d) permit to exist conditions that
would require any Borrower or any Subsidiary to make any "Net Proceeds
Offer" (as defined in the Senior Note Indenture as in existence on the
Closing Date),
-55-
pursuant to Section 4.05 of the Senior Note Indenture (as in
existence on the Closing Date);
(ii) make or permit any Subsidiary to make any payment of
any part or all of the Subordinated Debt (other than Subordinated Note
Debt) or take any other action or omit to take any other action in
respect of the Subordinated Debt (other than Subordinated Note Debt),
except in accordance with the subordination provisions thereof; or
(iii) amend or modify any agreement, instrument or document
evidencing or relating to any Subordinated Debt, except for the
issuance of supplemental indentures from time to time in order to add a
Subsidiary as a Subordinated Note Guarantor.
8.2.7. Distributions. Declare or make, or permit any Subsidiary to
-------------
declare or make, any Distributions, except for:
(i) Distributions by Falcon in an aggregate amount of up
to $1,500,000 in any fiscal year, so long as (a) no Event of Default is
in existence at the time of any such Distribution or would be caused
thereby, (b) immediately after giving effect to such Distribution,
Availability is at least $5,000,000, (c) the Fixed Charge Coverage
Ratio determined on the last day of the most recently completed fiscal
month for the 12 fiscal month period ending on such date, but including
the pro forma effect of such Distribution, is at least 1.25:1.0 and (d)
EBITDA for the 12 fiscal month period ending on the last day of the
most recently completed fiscal month is at least $34,000,000;
(ii) Distributions by any Borrower (other than Falcon) or
any Subsidiary of a Borrower;
(iii) Distributions paid solely in Securities of a Borrower
or any Subsidiary; and
(iv) Distributions by Epic to repurchase, and/or
Distributions by Falcon to purchase, Epic's Securities from current
employees of Epic to the extent required by the Stockholders Agreement
of Epic dated June 7, 2000, as in existence on the date hereof, with
the proceeds of (a) Revolving Credit Loans advanced hereunder, but only
to the extent that (1) no Event of Default is in existence at the time
of any such Distribution or would be caused thereby, (2) immediately
after giving effect to such Distribution, Availability is at least
$5,000,000 and (3) in the case of any Distribution in excess of
$7,000,000, EBITDA for the twelve (12) fiscal month period ending on
the last day of the most recently completed fiscal month is at least
$34,000,000, (b) new equity permitted by this Agreement and contributed
to a Borrower or a Domestic Subsidiary or (c) new Indebtedness for
Money Borrowed permitted by this Agreement and obtained by a Borrower
or a Domestic Subsidiary.
-56-
8.2.8. Capital Expenditures. Make Capital Expenditures (including,
--------------------
without limitation, by way of capitalized leases) which, in the
aggregate, as to all Borrowers and all of the Subsidiaries, exceed (i)
$4,600,000 during the fiscal year of Borrowers ending on November 1,
2003, (ii) $6,400,000 during the 2004 fiscal year, (iii) $6,400,000
during the 2005 fiscal year, (iv) $8,000,000 during the 2006 fiscal
year or (v) $8,000,000 during the 2007 fiscal year, except that 50% of
the unused portion of the Capital Expenditure allowance for any fiscal
year may be carried over to the immediately succeeding fiscal year
only, to be used in such succeeding fiscal year after all of the
Capital Expenditure allowance for that year has been used.
8.2.9. Disposition of Assets. Sell, lease or otherwise dispose of any
---------------------
of, or permit any Subsidiary to sell, lease or otherwise dispose of any
of, its Properties, including any disposition of Property as part of a
sale and leaseback transaction, to or in favor of any Person, except
for:
(i) sales of Inventory in the ordinary course of business;
(ii) transfers of Property by a Borrower or a Subsidiary to
a Borrower or a Domestic Subsidiary that is also a Guarantor;
(iii) transfers of Property by a Foreign Subsidiary to
another Foreign Subsidiary whose Securities are subject to a Pledge
Agreement;
(iv) dispositions of investments described in paragraphs
(v), (vi), (vii) and (viii) of the definition of the term "Restricted
Investments";
(v) sales, leases or other dispositions of Equipment or
other fixed assets with a fair market value of up to $750,000 in the
aggregate in any one calendar year, that are substantially worn,
damaged or obsolete and that are replaced with Equipment or other fixed
assets of like kind, function and value; provided, that (i) until so
--------
replaced, the proceeds of each such disposition shall be applied
against the Revolving Credit Loans (but shall not permanently reduce
the Revolving Loan Commitments), (ii) a Rebuild Reserve shall be
established in the amount thereof, until such time as such amounts are
to be used by Borrowers to replace the Property sold, (iii) the
replacement Property shall be acquired within 180 days after the
disposition of the Property to be replaced and (iv) the replacement
Property shall be free and clear of Liens other than Permitted Liens
that are not Purchase Money Liens; and provided further, that any such
-------- -------
amount that it is not timely used to purchase replacement Property as
provided herein shall be applied to the Obligations as provided in the
second sentence of subsection 3.3.1;
(vi) sales, leases and other dispositions of Property with
a fair market value of up to $750,000 in the aggregate in any one
calendar year, so long as (a) no Default or Event of Default is then in
existence or would result
-57-
from such transaction and (b) the proceeds thereof are applied to
the Obligations in accordance with subsection 3.3.1;
(vii) sales, leases and other dispositions of Property with
a fair market value of greater than $750,000 in the aggregate in any
one calendar year, but less than or equal to $3,000,000 in the
aggregate in any one calendar year, so long as (a) no Default or Event
of Default is then in existence or would result from such transaction,
(b) the proceeds thereof are applied to the Obligations in accordance
with subsection 3.3.1 and (c) each of the Agent and Tranche B Agent has
consented in writing to such transaction; and
(viii) sales, leases and other dispositions of Property with
a fair market value in excess of $3,000,000 in the aggregate in any one
calendar year, so long as (a) no Default or Event of Default is then in
existence or would result from such transaction, (b) the proceeds
thereof are applied to the Obligations in accordance with subsection
3.3.1 and (c) each Lender has consented in writing to such transaction.
8.2.10. Securities of Subsidiaries. Permit any of its Domestic
--------------------------
Subsidiaries to issue any additional Securities except to a Borrower or
a Domestic Subsidiary and except for director's qualifying Securities;
or permit any of its Foreign Subsidiaries to issue any additional
Securities except to a Borrower or a Subsidiary and except for
director's qualifying Securities.
8.2.11. ▇▇▇▇-and-Hold Sales, Etc. Make, or permit any Subsidiary to
------------------------
make, a sale to any customer on a ▇▇▇▇-and-hold, guaranteed sale, sale
and return, sale on approval, repurchase or return or consignment
basis, except for consignment sales of Inventory that does not
constitute Eligible Inventory with an aggregate value not in excess of
$250,000 at any time outstanding.
8.2.12. Restricted Investment. Make or have, or permit any Subsidiary
---------------------
of such Borrower to make or have, any Restricted Investment.
8.2.13. Subsidiaries and Joint Ventures. Create, acquire or otherwise
-------------------------------
suffer to exist, or permit any Subsidiary of such Borrower to create,
acquire or otherwise suffer to exist, any Subsidiary or joint venture
arrangement not in existence as of the date hereof.
8.2.14. Tax Consolidation. File or consent to the filing of any
-----------------
consolidated income tax return with any Person other than the other
Borrowers and the Subsidiaries of each Borrower.
8.2.15. Organizational Documents. Agree to, or suffer to occur, any
------------------------
amendment, supplement or addition to its or any Subsidiary's charter,
articles or certificate of incorporation, certificate of formation,
limited partnership agreement, bylaws, limited liability agreement,
operating agreement or other organizational
-58-
documents (as the case may be), that would reasonably be expected to
have a Material Adverse Effect.
8.2.16. Fiscal Year End. Change, or permit any Subsidiary to change,
---------------
its fiscal year end.
8.2.17. Negative Pledges. After the date hereof, enter into any
----------------
agreement (other than limitations on Foreign Subsidiaries contained in
any agreement or agreements evidencing Indebtedness of Foreign
Subsidiaries permitted under subsection 8.2.3(xi)), limiting the
ability of such Borrower or any Subsidiary to (i) voluntarily create
Liens upon any of its Property (other than limitations on junior Liens
on Property subject to Liens permitted by subsections 8.2.5(iv) and
(v)); (ii) pay dividends or make any other Distributions on its
Securities; (iii) make loans or advances to any Borrower or any
Subsidiary; or (iv) transfer any of its Property to any Borrower or any
Subsidiary.
8.2.18. Covenants re: Subordinated Note Indenture. Take any of the
-----------------------------------------
following actions, or permit any Subsidiary to take any of the
following actions: (i) designate any Indebtedness (other than the
Obligations) as Designated Senior Debt, (ii) enter into any Credit
Facility (other than the facility evidenced by this Agreement), (iii)
permit any Subsidiary to be newly designated or redesignated as a
Restricted Subsidiary or an Unrestricted Subsidiary under the terms of
the Subordinated Note Indenture without having provided at least 10
days prior written notice thereof to Agent or (iv) permit any Domestic
Subsidiary to not be a Subordinated Debt Guarantor for purposes of the
Subordinated Note Debt.
8.2.19. Leases. Become, or permit any Subsidiary to become, a lessee
------
under any operating lease (other than a lease under which such Borrower
or any Subsidiary is lessor) of Property if the aggregate Rentals
payable during any current or future period of twelve (12) consecutive
months under the lease in question and all other leases under which
Borrowers or any Subsidiary is then lessee would exceed $4,500,000. The
term "Rentals" means, as of the date of determination, all payments
which the lessee is required to make by the terms of any lease.
8.3. Specific Financial Covenants.
----------------------------
During the Term, and thereafter for so long as there are any
Obligations outstanding, Borrowers covenant jointly and severally that,
unless otherwise consented to by Required Lenders, in writing, they shall
comply with all of the financial covenants set forth in Exhibit 8.3 hereto.
-----------
If at any time any change in GAAP would affect the computation of any
financial ratio or requirement set forth in this Agreement, and either the
Borrowers or the Required Lenders shall so request, Agent, the Lenders and
the Borrowers shall negotiate in good faith to amend such ratio or
requirement to preserve the original intent thereof in light of such change
in GAAP (subject to the approval of the Borrowers and the Required Lenders);
provided, that until so amended, (i) such ratio or requirement shall
--------
continue to be computed in accordance with GAAP prior to such change therein
and (ii) the Borrowers shall provide to the
-59-
Agent and the Lenders financial statements and other documents required under
this Agreement or as reasonably requested hereunder setting forth a
reconciliation between calculations of such ratio or requirement made before
and after giving effect to such change in GAAP.
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the
other Loan Documents, and without affecting in any manner the rights of
Agent or any Lender under the other sections of this Agreement, no Lender
shall be required to make any Loan, nor shall Agent be required to or issue
or procure any Letter of Credit or LC Guaranty unless and until each of the
following conditions has been and continues to be satisfied:
9.1. Documentation.
-------------
Agent shall have received, in form and substance satisfactory to Agent
and Tranche B Agent and its counsel, a duly executed copy of this Agreement
and the other Loan Documents, together with such additional documents,
instruments, opinions and certificates as Agent and Tranche B Agent, each
Lender and their counsel shall reasonably require in connection therewith
from time to time.
9.2. No Default.
----------
No Default or Event of Default shall exist.
9.3. Other Conditions.
----------------
Each of the conditions precedent set forth in the Loan Documents
shall have been satisfied.
9.4. Availability.
------------
Agent shall have determined that immediately after Lenders have made
the initial Loans and after Agent has issued or procured the initial Letters
of Credit and LC Guaranties contemplated hereby, and Borrowers have paid
(or, if accrued, treated as paid), all closing costs incurred in connection
with the transactions contemplated hereby, Availability shall not be less
than $7,500,000.
9.5. No Litigation.
-------------
No action, proceeding, investigation, regulation or legislation shall
have been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, restrain or prohibit, or to obtain
damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby.
-60-
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1. Events of Default.
-----------------
The occurrence of one or more of the following events shall constitute
an "Event of Default":
10.1.1. Payment of Obligations. Borrowers shall fail to pay any of
----------------------
the Obligations hereunder or under any Note constituting principal on
the due date thereof (whether due at stated maturity, on demand,
upon acceleration or otherwise); or Borrowers shall fail to pay any
of the other Obligations hereunder or under any Note within three
(3) Business Days after the due date thereof (whether due at stated
maturity, on demand, upon acceleration or otherwise).
10.1.2. Misrepresentations. Any representation, warranty or other
------------------
statement made or furnished to Agent or any Lender by or on behalf of
any Borrower, any Subsidiary or any Guarantor in this Agreement, any of
the other Loan Documents or any instrument, certificate or financial
statement furnished in compliance with or in reference thereto proves
to have been false or misleading in any material respect when made,
furnished or reaffirmed pursuant to Section 7.2 hereof.
10.1.3. Breach of Specific Covenants. Any Borrower shall fail or
----------------------------
neglect to perform, keep or observe any covenant contained in Section
or subsection 5, 6, 8.1 (except 8.1.3 and 8.1.6), 8.2 or 8.3 hereof on
the date that such Borrower is required to perform, keep or observe
such covenant or shall fail or neglect to perform, keep or observe any
covenant contained in Section 8.1.3 or 8.1.6 hereof within five (5)
days following the date on which Borrowers are required to perform,
keep or observe such covenant.
10.1.4. Breach of Other Covenants. Any Borrower shall fail or neglect
-------------------------
to perform, keep or observe any covenant contained in this Agreement
(other than a covenant which is dealt with specifically elsewhere in
Section 10.1 hereof) and the breach of such other covenant is not cured
to Agent's satisfaction within thirty (30) days after the sooner to
occur of Borrowers' receipt of notice of such breach from Agent or the
date on which such failure or neglect first becomes known to any
officer of any Borrower.
10.1.5. Default Under Security Documents or Other Agreements. Any
----------------------------------------------------
event of default shall occur under, or any Borrower, any Subsidiary or
any Guarantor shall default in the performance or observance of any
term, covenant, condition or agreement contained in, any of the
Security Documents, or the Other Agreements and such default shall
continue beyond any applicable grace or cure period.
10.1.6. Other Defaults. (a) There shall occur any default or event of
--------------
default on the part of any Borrower, any Subsidiary or any Guarantor
under any agreement, document or instrument to which such Borrower,
such Subsidiary or such Guarantor
-61-
is a party or by which such Borrower, such Subsidiary or such Guarantor
or any of its Property is bound, evidencing or relating to any
Indebtedness for Money Borrowed (other than the Obligations) or any
Indebtedness under any operating lease, in any case with an outstanding
principal balance or total remaining amount of payments, as applicable,
in excess of $500,000, if the payment or maturity of such Indebtedness
for Money Borrowed or operating lease, as applicable, is or could be
accelerated in consequence of such event of default or demand for
payment of such Indebtedness for Money Borrowed or operating lease, as
applicable, is made or could be made in accordance with the terms
thereof, unless and until such event is cured or waived, (b) any
default or event of default (other than the event of default under the
Subordinated Note Indenture described in Exhibit 7.1.21 hereto) occurs
--------------
under the Subordinated Debt Documents, unless and until such event is
cured or waived, or (c) the Trustee under the Subordinated Note
Indenture or any holder of Subordinated Notes shall have taken any
enforcement action in respect of the event of default under the
Subordinated Note Indenture described in Exhibit 7.1.21 hereto.
--------------
10.1.7. Uninsured Losses. Any material loss, theft, damage or
----------------
destruction of any portion of the Collateral having a fair market value
of $500,000, in the aggregate, if not fully covered (subject to such
deductibles and self-insurance retentions as Agent shall have
permitted) by insurance.
10.1.8. Insolvency and Related Proceedings. Any Borrower, any
----------------------------------
Subsidiary or any Guarantor shall cease to be Solvent or shall suffer
the appointment of a receiver, trustee, custodian or similar fiduciary,
or shall make an assignment for the benefit of creditors, or any
petition for an order for relief shall be filed by or against any
Borrower, any Subsidiary or any Guarantor under applicable bankruptcy
laws (if an involuntary proceeding against any Borrower, any Subsidiary
or any Guarantor the continuation of such proceeding for more than
sixty (60) days), or any Borrower, any Subsidiary or any Guarantor
shall make any offer of settlement, extension or composition to their
respective unsecured creditors generally.
10.1.9. Business Disruption; Condemnation. There shall occur a
---------------------------------
cessation of a substantial part of the business of any Borrower, any
Subsidiary or any Guarantor for a period which materially adversely
affects such Borrower's, such Subsidiary's or such Guarantor's capacity
to continue its business on a profitable basis; or any Borrower, any
Subsidiary or any Guarantor shall suffer the loss or revocation of any
material license or permit now held or hereafter acquired by such
Borrower, such Subsidiary or such Guarantor which is necessary to the
continued or lawful operation of its business; or any Borrower, any
Subsidiary or any Guarantor shall be enjoined, restrained or in any way
prevented by court, governmental or administrative order from
conducting all or any material part of its business affairs; or any
material lease or agreement pursuant to which any Borrower, any
Subsidiary or any Guarantor leases, uses or occupies any Property shall
be canceled or terminated prior to the expiration of its stated term,
except any such lease or agreement the cancellation or termination of
which could not reasonably be expected to have a Material Adverse
-62-
Effect; or any material portion of the Collateral shall be taken
through condemnation or the value of such Property shall be impaired
through condemnation.
10.1.10. Change of Ownership. (a) any Person or affiliated group of
-------------------
Persons other than ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, the spouse, lineal descendants
and spouses of lineal descendants of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, the estates of
one or more of the foregoing individuals and trusts established solely
for the benefit of one or more of the foregoing individuals, shall own
and control, beneficially and of record either (i) in excess of 51% of
the issued and outstanding Voting Stock of Falcon or (ii) a sufficient
percentage of the issued and outstanding Voting Stock of Falcon to
control the board of directors of Falcon, (b) Falcon shall cease to own
and control, beneficially and of record (directly or indirectly), 100%
of the issued and outstanding Securities and Voting Stock of each of
the other Borrowers and each of the Domestic Subsidiaries other than
Epic, (c) Falcon shall cease to own and control, beneficially and of
record (directly or indirectly), at least 80% of the issued and
outstanding Securities and Voting Stock of Epic, (d) Falcon shall cease
to own and control, beneficially and of record (directly or
indirectly), the same percentage of the issued and outstanding
Securities and Voting Stock of each of the Foreign Subsidiaries that
Falcon owns (directly or indirectly) on the Closing Date, or (e) a
"Change of Control" (as defined in the Subordinated Note Indenture, as
in existence on the Closing Date) shall occur.
10.1.11. ERISA. A Reportable Event shall occur which, in Agent's
-----
reasonable determination, constitutes grounds for the termination by
the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a
trustee for any Plan, or if any Plan shall be terminated or any such
trustee shall be requested or appointed, or any Borrower, any
Subsidiary or any Guarantor is in "default" (as defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan
resulting from such Borrower's, such Subsidiary's or such Guarantor's
complete or partial withdrawal from such Plan and, in each case, any
such event could reasonably be expected to have a Material Adverse
Effect.
10.1.12. Challenge to Agreement. Any Borrower, any Subsidiary or any
----------------------
Guarantor, or any Affiliate of any of them, shall challenge or contest
in any action, suit or proceeding the validity or enforceability of
this Agreement or any of the other Loan Documents, the legality or
enforceability of any of the Obligations or the perfection or priority
of any Lien granted to Agent.
10.1.13. Repudiation of or Default Under Guaranty Agreement. Any
--------------------------------------------------
Guarantor shall revoke or attempt to revoke the Guaranty Agreement
signed by such Guarantor, or shall repudiate such Guarantor's liability
thereunder or shall be in default under the terms thereof.
10.1.14. Criminal Forfeiture. Any Borrower, any Subsidiary or any
-------------------
Guarantor shall be criminally indicted or convicted under any law that
could lead to a
-63-
forfeiture of any material Property of such Borrower, such Subsidiary
or such Guarantor.
10.1.15. Judgments. Any money judgments, writ of attachment or similar
---------
processes (collectively, "Judgments") are issued or rendered against
any Borrower, any Subsidiary or any Guarantor, or any of their
respective Property (i) in the case of money judgments, in an amount of
$100,000 or more for any single judgment, attachment or process or
$250,000 or more for all such judgments, attachments or processes in
the aggregate, in each case in excess of any applicable insurance with
respect to which the insurer has admitted liability, and (ii) in the
case of non-monetary Judgments, such Judgment or Judgments (in the
aggregate) could reasonably be expected to have a Material Adverse
Effect, in each case which Judgment is not stayed, released or
discharged within thirty (30) days.
10.1.16. Key Officer. If either ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------
shall cease to function in his current capacity as an executive officer
of Falcon and shall not be replaced with a Person or Persons reasonably
satisfactory to Agent and Tranche B Agent within one hundred twenty
(120) days thereafter.
10.2. Acceleration of the Obligations.
-------------------------------
(a) Upon or at any time after the occurrence and during
the continuance of an Event of Default, (i) the Revolving Loan
Commitments shall, at the option of Agent or Majority Lenders be
terminated and/or (ii) Agent or Majority Lenders may, and, subject to
Section 10.2(c), at the request of Majority Term Loan B Lenders, Agent
shall, terminate this Agreement and/or declare all or any portion of
the Obligations at once due and payable without presentment, demand
protest or further notice by Agent or any Lender, and Borrowers shall
forthwith pay to Agent, the full amount of such Obligations, provided,
--------
that upon the occurrence of an Event of Default specified in subsection
10.1.8 hereof, the Revolving Loan Commitments shall automatically be
terminated and all of the Obligations shall become automatically due
and payable, in each case without declaration, notice or demand by
Agent or any Lender.
(b) Agent shall take such action with respect to any
Default or Event of Default as shall be directed by the Majority
Lenders; provided, that unless and until Agent shall have received such
--------
directions, Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable and in the best interests
of Agent and Lenders, including any action (or the failure to act)
pursuant to the Loan Documents. Notwithstanding the foregoing, after
the occurrence of one of the events described in clauses (A), (B) or
(C) of Section 10.2(c), or after the expiration of any applicable
Action Standstill Period, Majority Term Loan B Lenders shall have the
right to direct Agent to (i) terminate this Agreement and/or accelerate
all or any portion of the Obligations as provided in Section 10.2(a),
(ii) commence and pursue a general strategy of liquidating the Property
of Borrowers, (iii) issue a blocking notice
-64-
with respect to any Subordinated Debt and (iv) otherwise direct
enforcement action, in each case in the absence of any such direction
from Majority Lenders. Agent shall promptly pursue such actions as
directed by Majority Term Loan B Lenders in good faith and in a
commercially reasonable manner.
(c) Notwithstanding anything herein contained to the
contrary, the Majority Term Loan B Lenders shall not make any request
to exercise rights under Section 10.2(a) or (b), unless (A) the
Revolving Credit and Term Loan A Termination Date has occurred, (B) the
Revolving Loan Commitments have been terminated, (C) any of the
Obligations have been accelerated (including, without limitation, by
reason of an Event of Default specified in subsection 10.1.8 in
accordance with Section 10.2(a)), (D) a Level 1 Event of Default is in
existence and shall have continued for a period of thirty (30) or more
days after an Action Notice has been received by Agent, without being
cured by Borrowers (or Revolving Credit and Term Loan A Lenders,
directly or indirectly through Borrowers) or (E) a ▇▇▇▇▇ ▇ Event of
Default is in existence and shall have continued for a period of ninety
(90) or more days after an Action Notice has been received by Agent
without being cured by Borrowers (or Revolving Credit and Term Loan A
Lenders directly or indirectly through Borrowers).
10.3. Other Remedies.
--------------
Upon the occurrence and during the continuance of an Event of Default,
Agent shall have and may exercise from time to time the following other
rights and remedies:
10.3.1. All of the rights and remedies of a secured party under the
UCC or under other applicable law, and all other legal and equitable
rights to which Agent or Lenders may be entitled, all of which rights
and remedies shall be cumulative and shall be in addition to any other
rights or remedies contained in this Agreement or any of the other Loan
Documents, and none of which shall be exclusive.
10.3.2. The right to take immediate possession of the Collateral, and
to (i) require each Borrower and each of its Subsidiaries to assemble
the Collateral, at Borrower's joint and several expense, and make it
available to Agent at a place designated by Agent which is reasonably
convenient to both parties, and (ii) enter any premises where any of
the Collateral shall be located and to keep and store the Collateral on
said premises until sold (and if said premises be the Property of any
Borrower or any Subsidiary, Borrower agrees not to charge, or permit
any Subsidiary to charge, Agent for storage thereof).
10.3.3. Subject to subsection 11.13, the right to sell or otherwise
dispose of all or any Collateral in its then condition, or after any
further manufacturing or processing thereof, at public or private sale
or sales, with such notice as may be required by law, in lots or in
bulk, for cash or on credit, all as Agent, in its sole discretion, may
deem advisable. Agent may, at Agent's option, disclaim any and all
warranties regarding the Collateral in connection with any such sale.
Each Borrower
-65-
agrees that ten (10) days' written notice to such Borrower or any of
its Restricted Subsidiaries of any public or private sale or other
disposition of Collateral shall be reasonable notice thereof, and such
sale shall be at such locations as Agent may designate in said notice.
Agent shall have the right to conduct such sales on any Borrower's or
any of its Subsidiaries' premises, without charge therefor, and such
sales may be adjourned from time to time in accordance with applicable
law. Agent shall have the right to sell, lease or otherwise dispose of
the Collateral, or any part thereof, for cash, credit or any
combination thereof, and Agent, on behalf of Lenders, may purchase all
or any part of the Collateral at public or, if permitted by law,
private sale and, in lieu of actual payment of such purchase price, may
set off the amount of such price against the Obligations. The proceeds
realized from the sale of any Collateral may be applied, after allowing
two (2) Business Days for collection, as provided in Section 3.11. If
any deficiency shall arise, each Borrower and each Guarantor shall
remain jointly and severally liable to Agent and Lenders therefor.
10.3.4. To the maximum extent such Borrower has the lawful right to
do so, Agent is hereby granted a license or other right to use, without
charge, (a) each Borrower's and each Subsidiary's labels, patents,
copyrights, licenses, rights of use of any name, trade secrets,
tradenames, trademarks and advertising matter, or any Property of a
similar nature, as it pertains to the Collateral, in completing,
advertising for sale and selling any Collateral and (b) each Borrower's
and each Subsidiary's rights under all licenses and all franchise
agreements shall inure to Agent's benefit.
10.3.5. Agent may, at its option, require Borrowers to deposit with
Agent funds equal to 105% of the LC Amount and, if Borrowers fail to
promptly make such deposit, Agent may advance such amount as a
Revolving Credit Loan (whether or not an Overadvance is created
thereby). Each such Revolving Credit Loan shall be secured by all of
the Collateral and shall constitute a Base Rate Portion. Any such
deposit or advance shall be held by Agent as a reserve to fund future
payments on such LC Guaranties and future drawings against such Letters
of Credit. At such time as all LC Guaranties have been paid or
terminated and all Letters of Credit have been drawn upon or expired,
any amount remaining in such reserve shall be applied against any
outstanding Obligations, or, if all Obligations have been indefeasibly
paid in full, returned to Borrowers.
10.4. Set Off and Sharing of Payments.
-------------------------------
In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, during the continuance of
any Event of Default, each Lender is hereby authorized by each Borrower at
any time or from time to time, with prior written consent of Agent and with
reasonably prompt subsequent notice to such Borrower (any prior or
contemporaneous notice to such Borrower being hereby expressly waived) to
set off and to appropriate and to apply any and all (i) balances held by
such Lender at any of its offices for the account of such Borrower or any of
its Subsidiaries (regardless of whether such balances are then due to such
Borrower or its Subsidiaries), and (ii) other property at any time held or
owing by such Lender to or for the credit or for the account of such
Borrower or any of its
-66-
Subsidiaries, against and on account of any of the Obligations. Each
Borrower agrees, to the fullest extent permitted by law, that any Lender may
exercise its right to set off with respect to amounts in excess of its pro
rata share of the Obligations and upon doing so shall deliver such excess to
Agent for the benefit of all Lenders in accordance with the priorities set
forth herein. Any such setoff shall be subject to the provisions of Section
3.10.
10.5. Remedies Cumulative; No Waiver.
------------------------------
All covenants, conditions, provisions, warranties, guaranties,
indemnities, and other undertakings of each Borrower contained in this
Agreement and the other Loan Documents, or in any document referred to
herein or contained in any agreement supplementary hereto or in any schedule
or in any Guaranty Agreement given to Agent or any Lender or contained in
any other agreement between any Lender and such Borrower or between Agent
and such Borrower heretofore, concurrently, or hereafter entered into, shall
be deemed cumulative to and not in derogation or substitution of any of the
terms, covenants, conditions, or agreements of such Borrower herein
contained. The failure or delay of Agent or any Lender to require strict
performance by any Borrower of any provision of this Agreement or to
exercise or enforce any rights, Liens, powers, or remedies hereunder or
under any of the aforesaid agreements or other documents or security or
Collateral shall not operate as a waiver of such performance, Liens, rights,
powers and remedies, but all such requirements, Liens, rights, powers, and
remedies shall continue in full force and effect until all Loans and other
Obligations owing or to become owing from such Borrower to Agent and each
Lender have been fully satisfied. None of the undertakings, agreements,
warranties, covenants and representations of any Borrower contained in this
Agreement or any of the other Loan Documents and no Default or Event of
Default by any Borrower under this Agreement or any other Loan Documents
shall be deemed to have been suspended or waived by Lenders, unless such
suspension or waiver is by an instrument in writing specifying such
suspension or waiver and is signed by a duly authorized representative of
Agent and Majority Lenders, Majority Term Loan B Lenders, Required Lenders
or all Lenders (in any case, as applicable) and directed to Borrowers.
SECTION 11. THE AGENT; CERTAIN PROVISIONS RELATING TO LENDERS
11.1. Authorization and Action.
------------------------
Each Lender hereby appoints and authorizes Agent to take such action
on its behalf and to exercise such powers under this Agreement and the other
Loan Documents as are delegated to Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto. Each Lender
hereby acknowledges that Agent shall not have by reason of this Agreement
assumed a fiduciary relationship in respect of any Lender. In performing its
functions and duties under this Agreement, Agent shall act solely as agent
of Lenders and shall not assume, or be deemed to have assumed, any
obligation toward, or relationship of agency or trust with or for, any
Borrower. As to any matters not expressly provided for by this Agreement and
the other Loan Documents (including without limitation enforcement and
collection of the Notes), Agent may, but shall not be required to, exercise
any discretion or take any action, but shall be required to act or to
refrain from acting (and
-67-
shall be fully protected in so acting or refraining from acting) upon the
instructions of Majority Lenders, whenever such instruction shall be
requested by Agent or required hereunder, or a greater or lesser number of
Lenders if so required hereunder, and such instructions shall be binding
upon all Lenders; provided, that Agent shall be fully justified in failing
--------
or refusing to take any action which exposes Agent to any liability or which
is contrary to this Agreement, the other Loan Documents or applicable law,
unless Agent is indemnified to its satisfaction by the other Lenders against
any and all liability and expense which it may incur by reason of taking or
continuing to take any such action. If Agent seeks the consent or approval
of Majority Lenders, Majority Term Loan B Lenders, or a greater or lesser
number of Lenders as required in this Agreement, with respect to any action
hereunder, Agent shall send notice thereof to each Lender and shall notify
each Lender at any time that Majority Lenders, Majority Term Loan B Lenders,
or such greater or lesser number of Lenders have instructed Agent to act or
refrain from acting pursuant hereto.
11.2. Agent's Reliance, Etc.
---------------------
Neither Agent, any Affiliate of Agent, nor any of their respective
directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement or the other Loan Documents, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of
the foregoing, Agent: (i) may treat each Lender party hereto as the holder
of Obligations until Agent receives written notice of the assignment or
transfer or such lender's portion of the Obligations signed by such Lender
and in form reasonably satisfactory to Agent; (ii) may consult with legal
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts, (iii) makes no warranties or representations to any Lender and
shall not be responsible to any Lender for any recitals, statements,
warranties or representations made in or in connection with this Agreement
or any other Loan Documents; (iv) shall not have any duty beyond Agent's
customary practices in respect of loans in which Agent is the only lender,
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement or the other Loan Documents
on the part of any Borrower, to inspect the property (including the books
and records) of any Borrower, to monitor the financial condition of any
Borrower or to ascertain the existence or possible existence or continuation
of any Default or Event of Default; (v) shall not be responsible to any
Lender for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or the other Loan
Documents or any other instrument or document furnished pursuant hereto or
thereto; (vi) shall not be liable to any Lender for any action taken, or
inaction, by Agent upon the instructions of Majority Lenders, Majority Term
Loan B Lenders or a greater or lesser number of Lenders, as required
pursuant to Section 11.1 hereof or refraining to take any action pending
such instructions; (vii) shall not be liable for any apportionment or
distributions of payments made by it in good faith pursuant to Section 3
hereof; (viii) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate, message or other instrument or writing (which may be by
telephone, facsimile, telegram, cable or telex) believed in good faith by it
to be
-68-
genuine and signed or sent by the proper party or parties; and (ix) may
assume that no Event of Default has occurred and is continuing, unless
Agent has actual knowledge of the Event of Default, has received notice from
a Borrower or a Borrower's independent certified public accounts stating the
nature of the Event of Default, or has received notice from a Lender stating
the nature of the Event of Default and that such Lender considers the Event
of Default to have occurred and to be continuing. In the event any
apportionment or distribution described in clause (vii) above is determined
to have been made in error, the sole recourse of any Person to whom payment
was due but not made shall be to recover from the recipients of such
payments any payment in excess of the amount to which they are determined to
have been entitled.
11.3. Fleet and Affiliates.
--------------------
With respect to its commitment hereunder to make Loans, Fleet shall
have the same rights and powers under this Agreement and the other Loan
Documents as any other Lender and may exercise the same as though it were
not Agent; and the terms "Lender," "Lenders", "Revolving Credit and Term
Loan A Lenders", "Majority Lenders", "Required Lenders" and, if applicable,
"Majority Term Loan B Lenders", shall, unless otherwise expressly indicated,
include Fleet in its individual capacity as a Lender. Fleet and its
Affiliates may lend money to, and generally engage in any kind of business
with, each Borrower, and any Person who may do business with or own
Securities of each Borrower, in each case, to the extent not in violation of
this Agreement, all as if Fleet were not Agent and without any duty to
account therefor to any other Lender.
11.4. Lender Credit Decision.
----------------------
Each Lender acknowledges that it has, independently and without
reliance upon Agent or any other Lender and based on the financial
statements referred to herein and such other documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will,
independently and without reliance upon Agent or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement. Agent shall not have any duty or responsibility,
either initially or on an ongoing basis, to provide any Lender with any
credit or other similar information regarding any Borrower.
11.5. Indemnification.
---------------
Lenders agree to indemnify Agent (to the extent not reimbursed by
Borrowers), in accordance with their respective Aggregate Percentages, from
and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against Agent in any way relating to or arising out of this
Agreement or any other Loan Document or any action taken or omitted by Agent
under this Agreement; provided, that no Lender shall be liable for any
--------
portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting
-69-
from Agent's gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender agrees to reimburse Agent promptly upon demand for
its ratable share, as set forth above, of any out-of-pocket expenses
(including attorneys' fees) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiation, legal proceedings or otherwise)
of, or legal advice in respect of rights or responsibilities under, this
Agreement and each other Loan Document, to the extent that Agent is not
reimbursed for such expenses by Borrowers. The obligations of Lenders under
this Section 11.5 shall survive the payment in full of all Obligations and
the termination of this Agreement. If after payment and distribution of any
amount by Agent to Lenders, any Lender or any other Person, including any
Borrower, any creditor of any Borrower, a liquidator, administrator or
trustee in bankruptcy, recovers from Agent any amount found to have been
wrongfully paid to Agent or disbursed by Agent to Lenders, then Lenders, in
accordance with their respective Aggregate Percentages, shall reimburse
Agent for all such amounts.
11.6. Rights and Remedies to be Exercised by Agent Only.
-------------------------------------------------
Each Lender agrees that, except as set forth in Sections 10.2
and 10.4, no Lender shall have any right individually (i) to realize
upon the security created by this Agreement or any other Loan Document, (ii)
to enforce any provision of this Agreement or any other Loan Document that
does not run directly to the benefit of such Lender, or (iii) directly to
make demand of any Borrower under this Agreement or any other Loan Document.
11.7. Agency Provisions Relating to Collateral.
----------------------------------------
Each Lender authorizes and ratifies Agent's entry into this
Agreement and the Security Documents for the benefit of Lenders. Each Lender
agrees that any action taken by Agent with respect to the Collateral in
accordance with the provisions of this Agreement or the Security Documents,
and the exercise by Agent of the powers set forth herein or therein,
together with such other powers as are reasonably incidental thereto, shall
be authorized and binding upon all Lenders. Agent is hereby authorized on
behalf of all Lenders, without the necessity of any notice to or further
consent from any Lender to take any action with respect to any Collateral or
the Loan Documents which may be necessary to perfect and maintain perfected
Agent's Liens upon the Collateral, for its benefit and the ratable benefit
of Lenders. Lenders hereby irrevocably authorize Agent, at its option and in
its discretion, to release any Lien granted to or held by Agent upon any
Collateral (i) upon termination of the Agreement and payment and
satisfaction of all Obligations; or (ii) constituting property being sold or
disposed of if Borrowers certify to Agent that the sale or disposition is
made in compliance with subsection 8.2.9 hereof, as it may be amended from
time to time (and Agent may rely conclusively on any such certificate,
without further inquiry); or (iii) constituting property in which no
Borrower owned any interest at the time the Lien was granted or at any time
thereafter; or (iv) subject to subsection 11.13, in connection with any
foreclosure sale or other enforcement action with respect to Collateral or
in connection with the other exercise by Agent of remedies hereunder, in
each case after the occurrence and during the continuation of an Event of
Default or (v) if approved, authorized or ratified in writing by Agent at
the direction of all Lenders. Upon request by Agent at any time, Lenders
will
-70-
confirm in writing Agent's authority to release particular types or
items of Collateral pursuant hereto. Agent shall have no obligation
whatsoever to any Lender or to any other Person to assure that the
Collateral exists or is owned by any Borrower or is cared for, protected or
insured or has been encumbered or that the Liens granted to Agent herein or
pursuant to the Security Documents have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or
under any duty of care, disclosure or fidelity, or to continue exercising,
any of its rights, authorities and powers granted or available to Agent in
this Section 11.7 or in any of the Loan Documents, it being understood and
agreed that in respect of the Collateral, or any act, omission or event
related thereto, Agent may act in any manner it may deem appropriate, in its
sole discretion, but consistent with the provisions of this Agreement,
including given Agent's own interest in the Collateral as a Lender and that
Agent shall have no duty or liability whatsoever to any Lender, except as
otherwise provided herein. Each Borrower and each Lender agrees that Agent
shall be the joint and several creditor of each and every obligation of
Borrower towards each Lender under the Loan Documents, and that,
accordingly, Agent will have its own independent right to demand performance
by each Borrower of those obligations.
11.8. Agent's Right to Purchase Commitments.
-------------------------------------
Agent shall have the right, but shall not be obligated, at any time
upon written notice to any Lender and with the consent of such Lender, which
may be granted or withheld in such Lender's sole discretion, to purchase for
Agent's own account all of such Lender's interests in this Agreement, the
other Loan Documents and the Obligations, for the face amount of the
outstanding Obligations owed to such Lender, including without limitation
all accrued and unpaid interest and fees.
11.9. Right of Sale, Assignment, Participations.
-----------------------------------------
Each Borrower hereby consents to any Lender's participation, sale,
assignment, transfer or other disposition, at any time or times hereafter,
of this Agreement and any of the other Loan Documents, or of any portion
hereof or thereof, including, without limitation, such Lender's rights,
title, interests, remedies, powers, and duties hereunder or thereunder
subject to the terms and conditions set forth below:
11.9.1. Sales, Assignments.
------------------
(a) Each Revolving Credit and Term Loan A Lender hereby
agrees that, with respect to any sale or assignment by it (i) no
such sale or assignment shall be for an amount of less than
$5,000,000, (ii) each such sale or assignment shall be made on
terms and conditions which are customary in the industry at the
time of the transaction, (iii) Agent and, in the absence of an
Event of Default, Borrowers, must consent, such consent not to be
unreasonably withheld, to each such assignment to a Person that is
not an original signatory to this Agreement, (iv) the assigning
Revolving Credit and Term Loan A Lender shall pay to Agent a
processing and recordation fee of $3,500 and any out-of-pocket
attorneys' fees and expenses incurred
-71-
by Agent in connection with any such sale or assignment and
(v) Agent, the assigning Revolving Credit and Term Loan A Lender and
the assignee Revolving Credit and Term Loan A Lender shall each
have executed and delivered an Assignment and Acceptance
Agreement. After such sale or assignment has been consummated
(x) the assignee Revolving Credit and Term Loan A Lender thereupon
shall become a "Lender" and a "Revolving Credit and Term Loan A
Lender" for all purposes of this Agreement and (y) the assigning
Revolving Credit and Term Loan A Lender shall have no further
liability for funding the portion of Revolving Loan Commitments
assumed by such other Revolving Credit and Term Loan A Lender.
(b) Each Term Loan B Lender hereby agrees that, with respect
to any sale or assignment by it (i) no such sale or assignment shall
be for an amount of less than $3,000,000 (except that no such
minimum amount shall apply to an assignment by a Term Loan B
Lender to an Affiliate of such Term Loan B Lender or a fund or
account managed by such Term Loan B Lender or an Affiliate of such
Term Loan B Lender), (ii) each such sale or assignment shall be
made on terms and conditions which are customary in the industry
at the time of the transaction, (iii) Tranche B Agent and, in the
absence of an Event of Default, Borrowers must consent, such
consent not to be unreasonably withheld, to each such assignment
to a Person that is not an original signatory to this Agreement
(except that no consent of Tranche B Agent or Borrowers shall be
required in connection with as assignment by a Term Loan B Lender
to an Affiliate of such Term Loan B Lender or a fund or account
managed by such Term Loan B Lender or an Affiliate of such Term
Loan B Lender), (iv) the assigning Term Loan B Lender shall pay to
Agent a processing and recordation fee of $3,500 (except that no
such fee shall be required in connection with an assignment by a
Term Loan B Lender to an Affiliate of such Term Loan B Lender or a
fund or account managed by such Term Loan B Lender or an Affiliate
of such Term Loan B Lender) and any out-of-pocket attorneys' fees
and expenses incurred by Agent in connection with any such sale or
assignment, and (iv) the assigning Term Loan B Lender and the
assignee Term Loan B Lender shall each have executed and delivered
an Assignment and Acceptance Agreement. After such sale or
assignment has been consummated (x) the assignee Term Loan B
Lender thereupon shall become a "Lender" and a "Term Loan B
Lender" for all purposes of this Agreement and (y) the assigning
Term Loan B Lender shall have no further liability for funding the
portion of Term Loan B Commitments assumed by such other Term Loan
B Lender.
(c) Borrowers authorize Agent, and Agent agrees, to maintain,
or cause to be maintained at its offices, a listing of the name
and address of each Term Loan B Lender and the Term Loan B
Commitment of, and principal amount of the Term Loan B owing to
such Term Loan B Lender from time to time ("Registered Loans").
The entries in such listing shall be conclusive and binding for
all purposes, absent manifest error, and Borrowers, Agent, Tranche
B Agent and Lenders shall treat each Person whose name is so
listed as a Term Loan B Lender hereunder for all purposes of this
Agreement.
-72-
(d) A Registered Loan (and the registered note, if any,
evidencing the same) may be assigned or sold in whole or in part
only by registration of such assignment or sale in the listing
kept by Agent (and each registered note shall expressly so
provide). Any assignment or sale of all or part of such Registered
Loan (and the registered note, if any, evidencing the same) may be
effected only by registration of such assignment or sale in the
listing kept by Agent, together with the surrender of the
registered note, if any, evidencing the same duly endorsed by (or
accompanied by a written instrument of assignment or sale duly
executed by) the holder of such registered note, whereupon, at the
request of the designated assignee(s) or transferee(s), one or
more new registered notes in the same aggregate principal amount
shall be issued to the designated assignee(s) or transferee(s).
Prior to the registration of assignment or sale of any Registered
Loan (and the registered note, if any, evidencing the same), Agent
and Tranche B Agent shall treat the Person in whose name such
Registered Loan (and the registered note, if any, evidencing the
same) is registered as the owner thereof for the purpose of
receiving all payments thereon and for all other purposes,
notwithstanding notice to the contrary.
11.9.2. Participations.
--------------
(a) Any Lender may grant participations in its extensions
of credit hereunder to any other Lender or other lending
institution (a "Participant"), provided that (i) no such
--------
participation shall be for an amount of less than $2,500,000 (or
$1,000,000, in the case of Term Loan B, except that no such minimum
amount shall apply to a participation by a Term Loan B Lender to an
Affiliate of such Term Loan B Lender or to a fund or account
managed by such Term Loan B Lender or an Affiliate of such Term
Loan B Lender), (ii) no Participant shall thereby acquire any
direct rights under this Agreement, (iii) no Participant shall be
granted any right to consent to any amendment, except to the extent
any of the same pertain to (1) reducing the aggregate principal
amount of, or interest rate on, or fees applicable to, any Loan,
(2) extending the final stated maturity of any Loan or the stated
maturity of any portion of any payment of principal of, or interest
or fees applicable to, any of the Loans, (3) any amendment that
pursuant to the terms of subsection 11.10 requires the vote of all
Lenders or (4) any amendment to subsection 8.2.8 or Section 8.3;
provided, that the rights described in this subclause (2) shall not
--------
be deemed to include the right to consent to any amendment with
respect to or which has the effect of requiring any mandatory
prepayment of any portion of any Loan or any amendment or waiver of
any Default or Event of Default, (iv) no sale of a participation in
extensions of credit shall in any manner relieve the originating
Lender of its obligations hereunder, (v) the originating Lender
shall remain solely responsible for the performance of such
obligations, (vi) Borrowers and Agent shall continue to deal solely
and directly with the originating Lender in connection with the
originating Lender's rights and obligations under this Agreement
and the other Loan Documents, (vii) in no event shall any financial
institution purchasing the participation grant a participation in
its participation interest in the Loans without the prior written
consent of Agent, and, in the absence of an Event of Default,
Borrowers, which consents shall not unreasonably
-73-
be withheld (except that no such consent shall be required in
connection with any such participation by a Term Loan B Lender to
an Affiliate of such Term Loan B Lender or to a fund or account
managed by a Term Loan B Lender or an Affiliate of such Term Loan
B Lender) and (viii) all amounts payable by Borrowers hereunder
shall be determined as if the originating Lender had not sold any
such participation.
(b) In the event that any Term Loan B Lender sells
participations in its Term Loan B Loan, such Term Loan B Lender
shall maintain a listing on which it enters the name of all
participants in the Registered Loans held by it. A Registered Loan
(and the registered note, if any, evidencing the same) may be
participated in whole or in part only by registration of such
participation in such participant listing (and each registered note
shall expressly so provide). Any participation of such Registered
Loan (and the registered note, if any, evidencing the same) may be
effected only by the registration of such participation in such
participant listing.
11.9.3. Certain Agreements of Borrowers. Each Borrower agrees that
-------------------------------
(i) it will use its best efforts to assist and cooperate with each
Lender in any manner reasonably requested by such Lender to effect the
sale of participation in or assignments of any of the Loan
Documents or any portion thereof or interest therein, including,
without limitation, assisting in the preparation of appropriate
disclosure documents and making members of management available at
reasonable times to meet with and answer questions of potential
assignees and Participants; and (ii) subject to the provisions of
Section 12.14 hereof, such Lender may disclose credit information
regarding each Borrower to any potential Participant or assignee.
11.9.4. Non U.S. Resident Transferees. If, pursuant to this
-----------------------------
Section 11.9, any interest in this Agreement or any Loans is
transferred to any transferee which is organized under the laws of any
jurisdiction other than the United States or any state thereof, the
transferor Lender shall cause such transferee (other than any
Participant), and may cause any Participant, concurrently with and as a
condition precedent to the effectiveness of such transfer, to (i)
represent to the transferor Lender (for the benefit of the transferor
Lender, Agent, and Borrowers) that under applicable law and treaties no
taxes will be required to be withheld by Agent, Borrowers or the
transferor Lender with respect to any payments to be made to such
transferee in respect of the interest so transferred, (ii) furnish to
the transferor Lender, Agent and Borrowers either United States
Internal Revenue Service Form W-8BEN or United States Internal Revenue
Service Form W-8ECI (wherein such transferee claims entitlement to
complete exemption from United States federal withholding tax on all
interest payments hereunder), and (iii) agree (for the benefit of the
transferor Lender, Agent and Borrowers) to provide the transferor
Lender, Agent and Borrowers a new Form W-8BEN or Form W-8ECI upon the
obsolescence of any previously delivered form and comparable statements
in accordance with applicable United States laws and regulations and
amendments duly executed and completed by such transferee, and to
comply from time to time with all applicable United States laws and
regulations with regard to such withholding tax exemption.
-74-
11.10. Amendment.
---------
No amendment or waiver of any provision of this Agreement (including
without limitation, any waiver of any Event of Default or Default) or any
other Loan Document (including without limitation any Note), nor consent to
any departure by any Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by Majority Lenders and
Borrowers, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
--------
that no amendment, waiver or consent shall be effective, unless:
(i) in writing and signed by each Lender, do any of the
following: (1) increase any Lender's Term Loan A Commitment or Term
Loan B Commitment, (2) reduce the number of Revolving Credit and Term
Loan A Lenders and/or Term Loan B Lenders which shall be required for
Lenders, any class of Lenders or any Lender to take any action
hereunder, (3) release or discharge any Person liable for the
performance of any obligations of any Borrower hereunder or under any
of the Loan Documents, (4) amend any provision of this Agreement that
requires the consent of all Lenders or consent to or waive any breach
thereof, (5) amend the definitions of the terms "Majority Lenders",
"Majority Term Loan B Lenders" or "Required Lenders", (6) amend
Section 3.11 or this Section 11.10, (7) reduce the amount of the
Special Reserve or the Rebuild Reserve, (8) share the Lien of the
Collateral with any other obligations of any Borrower, (9) release or
subordinate Agent's Lien on any Collateral to the extent not permitted
pursuant to Section 11.7, or (10) amend, modify, waive or consent to
any departure from the amortization schedule or any mandatory or
required prepayment (whether or not scheduled) of the principal of Term
Loan A;
(ii) in writing and signed by all Revolving Credit and
Term Loan A Lenders and Majority Term Loan B Lenders, do any of
the following: (1) increase the aggregate Loan Commitments or any
Revolving Credit and Term Loan A Lender's Revolving Loan
Commitment, except that, so long as no Event of Default is then in
existence, the aggregate Revolving Loan Commitments (and the pro
rata Revolving Loan Commitment of each Revolving Credit and Term
Loan A Lender) and, therefore, the aggregate Loan Commitments, may
be increased by up to $5,000,000 with the prior written consent of
all of Revolving Credit and Term Loan A Lenders, (2) increase the
amount of Overadvances permitted under subsection 1.1.2 or the
amount of Agent Loans permitted under subsection 1.1.4, (3)
increase any advance percentage contained in the definition of the
term "Borrowing Base", (4) amend the definitions of the terms
"Borrowing Base", "Eligible Account" or "Eligible Inventory" in a
manner that increases the amount of Revolving Credit Loans
available thereunder, (5) amend the definitions of the terms "Term
Loan B", "Term B Note" or "Term Loan B Commitment" or (6) increase
the aggregate fees and interest rates applicable to the Revolving
Credit Loans or Term Loan A (other than in connection with the
imposition of the Tranche A Default Rate) by an aggregate amount
in excess of 200 basis points during any one year period;
(iii) in writing and signed by Required Lenders, do any of
the following: (1) increase any interest rate payable hereunder in
respect of Term Loan B (including the Tranche B Default Rate), (2)
amend, modify or waive any Default or Event of Default under,
-75-
or grant any consent under any of Section or subsection 1.1.1(viii),
(ix) or (x), clause (a) of the second to last sentence of 1.1.1,
the last sentence of 1.1.2, the first sentence of 1.1.4, 1.3.2,
2.2, 2.6(b), 2.8 (as it relates to Tranche B Agent and Tranche B
Lenders), 2.10, 2.12, 3.2.1, 3.2.2, 3.3.1, 3.3.2, 3.3.3, 3.3.5,
3.3.7, 3.4.2, 3.5, 3.10, 4, 5, 6.1.1, 6.2.4 (with respect to
Borrowers' obligation to maintain Dominion Accounts), 7.1.2,
7.1.3, 7.1.4, 7.1.5, 7.1.6, 7.1.7, 7.1.10, 7.1.11, 7.1.14, 7.1.16,
7.1.17, 7.1.18, 7.1.19, 7.1.20, 7.1.21, 7.1.25, 7.1.26, 7.1.27,
7.2, 7.3, 8.1.1, 8.1.2, 8.1.3, 8.1.4, 8.1.6, 8.1.7, 8.1.11,
8.1.12, 8.2, 8.3, 9 (as it relates to the Loans made on the
Closing Date), 10, 11.1, 11.6, 11.7, 11.9.1(b), (c) or (d),
11.9.2, 11.13 and 13;
(iv) in writing and signed by all Revolving Credit and
Term Loan A Lenders, do any of the following: (1) decrease any
interest rate payable hereunder in respect of Term Loan A or the
Revolving Credit Loans (including the Tranche A Default Rate), (2)
reduce the principal of, or interest on, any amount payable
hereunder in respect of Term Loan A or the Revolving Credit Loans,
or under any Term A Note or Revolving Note, other than those
payable only to Fleet in its capacity as Agent, which may be
reduced by Fleet unilaterally, or (3) postpone any date fixed for
any payment of principal of, or interest on, any amounts payable
hereunder in respect of Term Loan A or the Revolving Credit Loans
or under any Term A Note or Revolving Note, other than those
payable only to Fleet in its capacity as Agent, which may be
postponed by Fleet unilaterally;
(v) in writing and signed by each Term Loan B Lender
affected thereby, do any of the following: (1) decrease any
interest rate payable hereunder in respect of Term Loan B
(including the Tranche B Default Rate) or change the composition
between Term Loan B Current Pay Interest and Term Loan B PIK
Interest, (2) reduce the principal of, interest on, or any amount
payable hereunder, or any fees payable hereunder, in respect of
Term Loan B, or under any Term B Note or (3) postpone any date
fixed for any payment of principal of, or interest on, any amounts
payable hereunder in respect of Term Loan B or under any Term B
Note;
(vi) in writing and signed by Agent in addition to the
Lenders required above to affect the rights or duties of Agent
under this Agreement, any Note or any other Loan Document; and
(vii) no amendment or waiver of any provision of this
Agreement, the Notes or any other Loan Document or any consent to
any departure by Borrowers therefrom, which requires or includes a
voting threshold other than Majority Lenders shall be effective
unless signed by Lenders constituting at least the necessary
number or percentage of Lenders required hereby for any such
amendment, waiver, departure or consent.
If a fee is to be paid by Borrowers in connection with any waiver or
amendment hereunder, the agreement evidencing such amendment or waiver may,
at the discretion of Agent (but shall not be required to), provide that only
Lenders executing such agreement by a specified date may share in such fee
(and in such case, such fee shall be divided among the applicable Lenders on
a pro rata basis without including the interests of any Lenders who have not
timely executed such agreement). Notwithstanding the foregoing,
-76-
in connection with each amendment, waiver or consent agreed to pursuant to
this subsection 11.10 to which the consent of no Term Loan B Lender is
required, the Term Loan B Lenders shall be entitled to receive a fee or
interest, as applicable, equal to 150% of the total compensation (including
fees and increases in interest) received by the consenting Lenders in
connection therewith, payable in the same manner and form as such
compensation, to be allocated among the Term Loan B Lenders on a pro rata
basis.
11.11. Resignation of Agent; Appointment of Successor.
----------------------------------------------
Subject to the appointment of a successor Agent in the manner set forth
below, and the acceptance of such appointment by such successor Agent, Agent
may resign as Agent by giving not less than thirty (30) days' prior written
notice to Lenders and Borrowers. If Agent shall resign under this Agreement,
then, (i) subject to the consent of Borrowers (which consent shall not be
unreasonably withheld and which consent shall not be required during any
period in which a Default or an Event of Default exists), Majority Lenders
shall appoint from among Lenders a successor agent for Lenders or (ii) if a
successor agent shall not be so appointed and approved within the thirty
(30) day period following Agent's notice to Lenders and Borrowers of its
resignation, then Agent shall appoint a successor agent who shall serve as
Agent until such time as Majority Lenders appoint a successor agent, subject
to Borrowers' consent as set forth above. Upon its appointment, such
successor agent shall succeed to the rights, powers and duties of Agent and
the term "Agent" shall mean such successor effective upon its appointment,
and the former Agent's rights, powers and duties as Agent shall be
terminated without any other or further act or deed on the part of such
former Agent or any of the parties to this Agreement. After the resignation
of any Agent hereunder, the provisions of this Section 11 shall inure to the
benefit of such former Agent and such former Agent shall not by reason of
such resignation be deemed to be released from liability for any actions
taken or not taken by it while it was an Agent under this Agreement.
Notwithstanding the foregoing, simultaneously with the payment in full in
cash of all Obligations other than Obligations in respect of Term Loan B,
Agent at such time shall be deemed to have resigned and the Tranche B Agent
shall be appointed as Agent hereunder, effective upon such payment.
11.12. Audit and Examination Reports; Disclaimer by Lenders.
----------------------------------------------------
By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such
Lender, promptly after it becomes available, a copy of each audit
or examination report (each a "Report" and collectively, "Reports")
prepared by or on behalf of Agent;
(b) expressly agrees and acknowledges that Agent (i) does
not make any representation or warranty as to the accuracy of any
Report, and (ii) shall not be liable for any information contained
in any Report;
-77-
(c) expressly agrees and acknowledges that the Reports are
not comprehensive audits or examinations, that Agent or other party
performing any audit or examination will inspect only specific
information regarding each Borrower and will rely significantly
upon each Borrower's books and records, as well as on
representations of each Borrower's personnel;
(d) agrees to keep all Reports confidential and strictly
for its internal use, and not to distribute except to its
participants, or use any Report in any other manner, in accordance
with the provisions of Section 12.14; and
(e) without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i)
to hold Agent and any such other Lender preparing a Report
harmless from any action the indemnifying Lender may take or
conclusion the indemnifying Lender may reach or draw from any
Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to any Borrower,
or the indemnifying Lender's participation in, or the indemnifying
Lender's purchase of, a loan or loans of any Borrower; and (ii) to
pay and protect, and indemnify, defend and hold Agent and any such
other Lender preparing a Report harmless from and against, the
claims, actions, proceedings, damages, costs, expenses and other
amounts (including attorney's fees and expenses) incurred by Agent
and any such other Lender preparing a Report as the direct or
indirect result of any third parties who might obtain all or part
of any Report through the indemnifying Lender.
11.13. Buyout Right.
------------
(a) If Agent proposes a sale, lease or other disposition of
Collateral pursuant to Section 11.7, including without limitation
a sale of all or substantially all of the Collateral, Agent shall
first provide Tranche B Agent with a written Sale Notice. No such
sale, lease or other disposition shall be consummated unless Agent
does not receive a written Buyout Notice from Tranche B Agent
within 10 Business Days after Tranche B Agent's receipt of the
Sale Notice, or, if such Buyout Notice has been timely received by
Agent, if Tranche B Agent (and any other Persons acceptable to
Tranche B Agent) fails to consummate a Buyout within 10 days after
Agent's receipt of the Buyout Notice. Any Buyout Notice given by
Tranche B Agent shall be irrevocable. The failure of Tranche B
Agent to timely deliver a Buyout Notice or consummate a Buyout in
any instance shall constitute a waiver by Tranche B Agent of its
rights under this subsection 11.13(a) with respect to the
particular sale, lease or other disposition in question. In
addition, if Tranche B Agent fails to timely consummate a Buyout
that is the subject of a Buyout Notice, Agent and Revolving Credit
and Term Loan A Lenders shall be entitled to bring legal action
against Tranche B Agent for equitable relief (including specific
performance) in respect thereof.
-78-
(b) Tranche B Agent shall have the right to deliver to Agent
a Buyout Notice (i) within 45 days after the commencement of an
Action Standstill Period or (ii) within 5 Business Days after the
Revolving Credit and Term Loan A Lenders have suspended the
Revolving Credit Loans or have ceased to make Revolving Credit
Loan advances to Borrowers pursuant to subsection 1.1.1, and,
within 10 days after delivery to Agent of any such Buyout Notice,
to consummate a Buyout. Any Buyout Notice given by Tranche B Agent
shall be irrevocable. The failure of Tranche B Agent to timely
deliver a Buyout Notice or consummate a Buyout in any instance
shall constitute a waiver by Tranche B Agent of its rights under
this subsection 11.13(b). In addition, if Tranche B Agent fails to
timely consummate a Buyout that is the subject of a Buyout Notice,
Agent and Revolving Credit and Term Loan A Lenders shall be
entitled to bring legal action against Tranche B Agent for
equitable relief (including specific performance) in respect
thereof. Notwithstanding anything to the contrary contained
herein, Agent shall be entitled to pursue any enforcement action
available to Agent under the Loan Documents and applicable law
regardless of Tranche B Agent's rights under this subsection
11.13(b) or the receipt by Agent of a Buyout Notice.
(c) Upon consummation of a Buyout, Agent will assign all
of its Liens to Tranche B Agent and resign as Agent hereunder and
Tranche B Agent will succeed to the role as Agent.
(d) If Tranche B Agent consummates a Buyout and, within
180 days thereafter, receives a sufficient amount in repayment of the
Obligations (whether by virtue of sale of the Obligations, a sale
of Collateral or other Property, the refinance of the Obligations
or otherwise) to repay all then-outstanding fees, costs, expenses,
principal and interest included within the Obligations (other than
prepayment fees), then any additional amount received will be paid
first to Agent, for the pro rata benefit of Revolving Credit and
Term Loan A Lenders, for application against the prepayment fee
pursuant to subsection 2.6(a) that would have been payable if the
Buyout had constituted a repayment by Borrowers of the applicable
Obligations prior to application against any prepayment fee that
may be owing to any other Person in respect thereof.
SECTION 12. MISCELLANEOUS
12.1. Power of Attorney.
-----------------
Each Borrower hereby irrevocably designates, makes, constitutes and
appoints Agent (and all Persons designated by Agent) as such Borrower's true
and lawful attorney (and agent-in-fact), solely with respect to the matters
set forth in this Section 12.1, and Agent, or Agent's agent, may, without
notice to any Borrower and in such Borrower's or Agent's name, but at the
cost and expense of such Borrower:
12.1.1. At such time or times as Agent or said agent, in its sole
discretion, may determine, endorse such Borrower's name on any checks,
notes, acceptances,
-79-
drafts, money orders or any other evidence of payment or proceeds of
the Collateral which come into the possession of Agent or under Agent's
control.
12.1.2. At such time or times upon or after the occurrence and during
the continuance of an Event of Default (provided that the occurrence of
an Event of Default shall not be required with respect to clauses (iv),
(vi), (ix) and (x) below), as Agent or its agent in its sole discretion
may determine: (i) demand payment of the Accounts from the Account
Debtors, enforce payment of the Accounts by legal proceedings or
otherwise, and generally exercise all of such Borrower's rights and
remedies with respect to the collection of the Accounts; (ii) settle,
adjust, compromise, discharge or release any of the Accounts or other
Collateral or any legal proceedings brought to collect any of the
Accounts or other Collateral; (iii) sell or assign any of the Accounts
and other Collateral upon such terms, for such amounts and at such time
or times as Agent deems advisable, and at Agent's option, with all
warranties regarding the Collateral disclaimed; (iv) take control, in
any manner, of any item of payment or proceeds relating to any
Collateral; (v) prepare, file and sign such Borrower's name to a proof
of claim in bankruptcy or similar document against any Account Debtor
or to any notice of lien, assignment or satisfaction of lien or similar
document in connection with any of the Collateral; (vi) receive and
open all mail received by Agent and addressed to such Borrower, (vii)
notify postal authorities to change the address for delivery thereof to
such address as Agent may designate; (viii) endorse the name of such
Borrower upon any of the items of payment or proceeds relating to any
Collateral and deposit the same to the account of Agent on account of
the Obligations; (ix) endorse the name of such Borrower upon any
chattel paper, document, instrument, invoice, freight ▇▇▇▇, ▇▇▇▇ of
lading or similar document or agreement relating to the Accounts,
Inventory and any other Collateral; (x) use such Borrower's stationery
and sign the name of such Borrower to verifications of the Accounts and
notices thereof to Account Debtors; (xi) use the information recorded
on or contained in any data processing equipment and Computer Hardware
and Software relating to the Accounts, Inventory, Equipment and any
other Collateral; (xii) make and adjust claims under policies of
insurance; and (xiii) do all other acts and things necessary, in
Agent's reasonable determination, to fulfill such Borrower's
obligations under this Agreement.
The power of attorney granted hereby shall constitute a power coupled
with an interest and shall be irrevocable.
12.2. Indemnity.
---------
Borrowers hereby agree to jointly and severally indemnify Agent and
each Lender (and each of their Affiliates) and hold Agent and each Lender
(and each of their Affiliates) harmless from and against any liability,
loss, damage, suit, action or proceeding ever suffered or incurred by any
such Person (including reasonable attorneys fees and legal expenses) as the
result of such Borrower's failure to observe, perform or discharge such
Borrower's duties hereunder. In addition, Borrowers shall jointly and
severally defend Agent and each Lender (and each of their Affiliates)
against and save it harmless from all claims of
-80-
any Person with respect to the Collateral (except those resulting from
the gross negligence or intentional misconduct of any such indemnified
Person). Without limiting the generality of the foregoing, these indemnities
shall extend to any loss, damage, cost, expense or liability incurred by
Agent or any Lender (or any of their Affiliates) or any claim asserted
against Agent or any Lender (or any of their Affiliates) by any Person,
directly or indirectly arising out of or attributable to (i) the use,
generation, storage, release, threatened release, discharge, disposal or
presence of any solid or hazardous waste on, under or about the Collateral
or (ii) any Borrower's or any other Person's failure to comply with laws
applicable to solid or hazardous waste materials or other toxic substances.
Notwithstanding any contrary provision in this Agreement, the obligation of
each Borrower under this Section 12.2 shall survive the payment in full of
the Obligations and the termination of this Agreement.
12.3. Sale of Interest.
----------------
No Borrower may sell, assign or transfer any interest in this
Agreement, any of the other Loan Documents, or any of the Obligations,
or any portion thereof, including, without limitation, such Borrower's
rights, title, interests, remedies, powers, and duties hereunder or
thereunder.
12.4. Severability.
------------
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
12.5. Successors and Assigns.
----------------------
This Agreement, the Other Agreements and the Security Documents shall
be binding upon and inure to the benefit of the successors and assigns of
Borrower, Agent and each Lender permitted under Section 11.9 hereof.
12.6. Cumulative Effect; Conflict of Terms.
------------------------------------
The provisions of the Other Agreements and the Security Documents are
hereby made cumulative with the provisions of this Agreement. Except as
otherwise provided in Section 3.2 hereof and except as provided in any of
the other Loan Documents by specific reference to the applicable provision
of this Agreement, if any provision contained in this Agreement is in direct
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and
control.
12.7. Execution in Counterparts.
-------------------------
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be
-81-
deemed to be an original and all of which counterparts taken together shall
constitute but one and the same instrument.
12.8. Notice.
------
Except as otherwise provided herein, all notices, requests and demands
to or upon a party hereto, to be effective, shall be in writing, and be sent
by registered or certified mail, return receipt requested, by personal
delivery against receipt, by overnight courier or by facsimile and, unless
otherwise expressly provided herein, shall be deemed to have been validly
served, given, delivered or received immediately when delivered against
receipt, one Business Day after deposit with an overnight courier or, in the
case of facsimile notice, when sent, addressed as follows:
If to Agent or Fleet: Fleet Capital Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Loan Administration Manager
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Goldberg, Kohn, Bell, Black,
▇▇▇▇▇▇▇▇▇▇ & Moritz, Ltd.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to any Borrower: c/o Falcon Products, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
One ▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
-82-
If to Tranche B Agent: Back Bay Capital Funding LLC
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
Managing Director
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to any other Lender, at its address indicated on the signature
pages hereof or in a notice to Borrowers of an assignment of a
Note,
or to such other address or facsimile number as each party may designate for
itself by notice given in accordance with this Section 12.8; provided,
--------
however, that any notice, request or demand to or upon Agent or a Lender
pursuant to subsection 3.1.1 or 4.2.2 hereof shall not be effective until
received by Agent or such Lender.
12.9. Consent.
-------
Whenever Agent's, Majority Lenders', Majority Term Loan B Lenders',
Required Lenders', or all Lenders' consent is required to be obtained under
this Agreement, any of the Other Agreements or any of the Security Documents
as a condition to any action, inaction, condition or event, except as
otherwise specifically provided herein, Agent, Majority Lenders, Majority
Term Loan B Lenders, Required Lenders or all Lenders, as applicable, shall
be authorized to give or withhold such consent in their sole and absolute
discretion and to condition its consent upon the giving of additional
Collateral security for the Obligations, the payment of money or any other
matter.
12.10. Credit Inquiries.
----------------
Each Borrower hereby authorizes and permits Agent and each Lender
to respond to usual and customary credit inquiries from third parties
concerning such Borrower or any of its Subsidiaries.
12.11. Time of Essence.
---------------
Time is of the essence of this Agreement, the Other Agreements and the
Security Documents.
-83-
12.12. Entire Agreement.
----------------
This Agreement and the other Loan Documents, together with all
other instruments, agreements and certificates executed by the parties in
connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with
respect to the subject matter hereof and thereof and supersede all prior
agreements, understandings and inducements, whether express or implied, oral
or written.
12.13. Interpretation.
--------------
No provision of this Agreement or any of the other Loan Documents shall
be construed against or interpreted to the disadvantage of any party hereto
by any court or other governmental or judicial authority by reason of such
party having or being deemed to have structured or dictated such provision.
12.14. Confidentiality.
---------------
Agent and each Lender shall hold all nonpublic information
obtained pursuant to the requirements of this Agreement in accordance with
Agent's and such Lender's customary procedures for handling confidential
information of this nature and in accordance with safe and sound banking
practices and in any event may make disclosure reasonably required by a
prospective participant or assignee in connection with the contemplated
participation or assignment or as required or requested by any governmental
authority or representative thereof or pursuant to legal process and shall
require any such participant or assignee to agree to comply with this
Section 12.14.
12.15. GOVERNING LAW; CONSENT TO FORUM.
-------------------------------
THIS AGREEMENT HAS BEEN NEGOTIATED, EXECUTED AND DELIVERED IN AND
SHALL BE DEEMED TO HAVE BEEN MADE IN CHICAGO, ILLINOIS. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS; PROVIDED, HOWEVER, THAT THE PERFECTION, THE EFFECT OF THE
--------
PERFECTION OR NON-PERFECTION AND THE PRIORITY OF THE SECURITY INTERESTS AND
LIENS CREATED BY THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF
THE APPLICABLE JURISDICTION AND THAT IF ANY OF THE COLLATERAL SHALL BE
LOCATED IN ANY JURISDICTION OTHER THAN ILLINOIS, THE LAWS OF SUCH
JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE
OF AGENT'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF AGENT'S OTHER
REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH
JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF ILLINOIS.
AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY
PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF
-84-
ANY BORROWER, AGENT OR ANY LENDER, EACH BORROWER HEREBY CONSENTS AND
AGREES THAT THE CIRCUIT COURT OF ▇▇▇▇ COUNTY, ILLINOIS, OR, AT AGENT'S
OPTION, THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS, EASTERN DIVISION, SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR
AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWERS ON THE ONE HAND AND
AGENT OR ANY LENDER ON THE OTHER HAND PERTAINING TO THIS AGREEMENT OR TO ANY
MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. EACH BORROWER EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND EACH BORROWER HEREBY WAIVES ANY OBJECTION
WHICH SUCH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING
----- --- ----------
OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF
SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL ADDRESSED TO SUCH BORROWER AT THE ADDRESS SET FORTH IN THIS
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
EARLIER OF SUCH BORROWER'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT
SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF AGENT OR ANY LENDER TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE
ENFORCEMENT BY AGENT OR ANY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN
ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
12.16. WAIVERS BY BORROWERS.
--------------------
EACH BORROWER WAIVES (I) THE RIGHT TO TRIAL BY JURY (WHICH AGENT
AND EACH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN
DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (II) PRESENTMENT, DEMAND AND
PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY,
RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL
COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS ,
CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY AGENT OR ANY LENDER ON
WHICH SUCH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND
CONFIRMS WHATEVER AGENT OR ANY LENDER MAY DO IN THIS REGARD; (III) NOTICE
PRIOR TO AGENT'S TAKING
-85-
POSSESSION OR CONTROL OF THE COLLATERAL OR, TO THE MAXIMUM EXTENT PERMITTED
BY APPLICABLE LAW, ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY
COURT PRIOR TO ALLOWING AGENT TO EXERCISE ANY OF AGENT'S REMEDIES; (IV) TO
THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, THE BENEFIT OF ALL
VALUATION, APPRAISEMENT AND EXEMPTION LAWS; (V) NOTICE OF ACCEPTANCE HEREOF
AND (VI) EXCEPT AS PROHIBITED BY LAW, ANY RIGHT TO CLAIM OR RECOVER ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH BORROWER ACKNOWLEDGES THAT THE
FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO AGENT'S AND EACH LENDER'S
ENTERING INTO THIS AGREEMENT AND THAT AGENT AND EACH LENDER IS RELYING UPON
THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH SUCH BORROWER. EACH
BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS
WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY
THE COURT.
12.17. Advertisement.
-------------
Each Borrower hereby authorizes each of Agent, Tranche B Agent
and each Lender to publish the name of such Borrower and the amount of
the credit facility provided hereunder in any "tombstone" or comparable
advertisement which Agent, Tranche B Agent or such Lender, as applicable,
elects to publish.
SECTION 13. THE TRANCHE B AGENT
13.1. Authorization and Action.
------------------------
Each Term Loan B Lender hereby appoints and authorizes Tranche B Agent
to take such action on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are delegated to Tranche B Agent
by the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. Each Term Loan B Lender hereby acknowledges that Tranche
B Agent shall not have by reason of this Agreement assumed a fiduciary
relationship in respect of any Term Loan B Lender. In performing its
functions and duties under this Agreement, Tranche B Agent shall act solely
as agent of Term Loan B Lenders and shall not assume, or be deemed to have
assumed, any obligation toward, or relationship of agency or trust with or
for, any Borrower. As to any matters not expressly provided for by this
Agreement and the other Loan Documents, Tranche B Agent may, but shall not
be required to, exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected in
so acting or refraining from acting) upon the instructions of Majority Term
Loan B Lenders, whenever such instruction shall be requested by Tranche B
Agent or required hereunder, or a greater or lesser number of Term Loan B
Lenders if so required hereunder, and such instructions shall
-86-
be binding upon all Term Loan B Lenders; provided, that Tranche B Agent
--------
shall be fully justified in failing or refusing to take any action which
exposes Tranche B Agent to any liability or which is contrary to this
Agreement, the other Loan Documents or applicable law, unless Tranche B
Agent is indemnified to its satisfaction by the other Term Loan B Lenders
against any and all liability and expense which it may incur by reason of
taking or continuing to take any such action. If Agent seeks the consent or
approval of Majority Term Loan B Lenders, or a greater or lesser number of
Term Loan B Lenders as required in this Agreement, with respect to any
action hereunder, Tranche B Agent shall send notice thereof to each Term
Loan B Lender and shall notify each Term Loan B Lender at any time that
Majority Term Loan B Lenders, or such greater or lesser number of Lenders
have instructed Agent to act or refrain from acting pursuant hereto.
13.2. Tranche B Agent's Reliance, Etc.
-------------------------------
Neither Tranche B Agent, any Affiliate of Tranche B Agent, nor any of
their respective directors, officers, agents or employees shall be liable
for any action taken or omitted to be taken by it or them under or in
connection with this Agreement or the other Loan Documents, except for its
or their own gross negligence or willful misconduct. Without limitation of
the generality of the foregoing, Tranche B Agent: (i) may treat each Term
Loan B Lender party hereto as the holder of Obligations until Tranche B
Agent receives written notice of the assignment or transfer or such lender's
portion of the Obligations signed by such Term Loan B Lender and in form
reasonably satisfactory to Tranche B Agent; (ii) may consult with legal
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts, (iii) makes no warranties or representations to any Term Loan B
Lender and shall not be responsible to any Term Loan B Lender for any
recitals, statements, warranties or representations made in or in connection
with this Agreement or any other Loan Documents; (iv) shall not have any
duty beyond Tranche B Agent's customary practices in respect of loans in
which Tranche B Agent is the only lender, to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions
of this Agreement or the other Loan Documents on the part of any Borrower,
to inspect the property (including the books and records) of any Borrower,
to monitor the financial condition of any Borrower or to ascertain the
existence or possible existence or continuation of any Default or Event of
Default; (v) shall not be responsible to any Term Loan B Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or the other Loan Documents or any other instrument
or document furnished pursuant hereto or thereto; (vi) shall not be liable
to any Term Loan B Lender for any action taken, or inaction, by Tranche B
Agent upon the instructions of Term Loan B Lenders, Majority Term Loan B
Lenders or a greater or lesser number of Term Loan B Lenders, as required
pursuant to Section 13.1 hereof or refraining to take any action pending
such instructions; (vii) shall not be liable for any apportionment or
distributions of payments made by it in good faith pursuant to Section 3
hereof; (viii) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate, message or other instrument or writing (which may be by
telephone, facsimile, telegram,
-87-
cable or telex) believed in good faith by it to be genuine and signed
or sent by the proper party or parties; and (ix) may assume that no Event of
Default has occurred and is continuing, unless Tranche B Agent has actual
knowledge of the Event of Default, has received notice from a Borrower or a
Borrower's independent certified public accounts stating the nature of the
Event of Default, or has received notice from a Term Loan B Lender stating
the nature of the Event of Default and that such Term Loan B Lender
considers the Event of Default to have occurred and to be continuing. In the
event any apportionment or distribution described in clause (vii) above is
determined to have been made in error, the sole recourse of any Person to
whom payment was due but not made shall be to recover from the recipients of
such payments any payment in excess of the amount to which they are
determined to have been entitled.
13.3. Back Bay and Affiliates.
-----------------------
With respect to its commitment hereunder to make Loans, Back Bay shall
have the same rights and powers under this Agreement and the other Loan
Documents as any other Lender and may exercise the same as though it were
not Tranche B Agent; and the terms "Lender," "Lenders", "Required Lenders"
and, "Majority Term Loan B Lenders", shall, unless otherwise expressly
indicated, include Back Bay in its individual capacity as a Term Loan B
Lender. Back Bay and its Affiliates may lend money to, and generally engage
in any kind of business with, each Borrower, and any Person who may do
business with or own Securities of each Borrower, in each case, to the
extent not in violation of this Agreement, all as if Back Bay were not
Tranche B Agent and without any duty to account therefor to any other Term
Loan B Lender.
13.4. Term Loan B Lender Credit Decision.
----------------------------------
Each Term Loan B Lender acknowledges that it has, independently and
without reliance upon Tranche B Agent or any other Term Loan B Lender and
based on the financial statements referred to herein and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Term Loan B Lender
also acknowledges that it will, independently and without reliance upon
Tranche B Agent or any other Term Loan B Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under this
Agreement. Tranche B Agent shall not have any duty or responsibility, either
initially or on an ongoing basis, to provide any Term Loan B Lender with any
credit or other similar information regarding any Borrower.
13.5. Indemnification.
---------------
Term Loan B Lenders agree to indemnify Tranche B Agent (to the extent
not reimbursed by Borrowers), in accordance with their respective Aggregate
Percentages, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against Tranche B Agent in any way relating to or
arising out of this Agreement or any other Loan Document or any action taken
or omitted by
-▇▇-
▇▇▇▇▇▇▇ ▇ Agent under this Agreement; provided that no Term Loan B
--------
Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from Tranche B Agent's gross negligence or willful
misconduct. Without limitation of the foregoing, each Term Loan B Lender
agrees to reimburse Tranche B Agent promptly upon demand for its ratable
share, as set forth above, of any out-of-pocket expenses (including
attorneys' fees) incurred by Tranche B Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiation, legal proceedings or otherwise)
of, or legal advice in respect of rights or responsibilities under, this
Agreement and each other Loan Document, to the extent that Tranche B Agent
is not reimbursed for such expenses by Borrowers. The obligations of Term
Loan B Lenders under this Section 13.5 shall survive the payment in full of
all Obligations and the termination of this Agreement. If after payment and
distribution of any amount by Tranche B Agent to Term Loan B Lenders, any
Term Loan B Lender or any other Person, including any Borrower, any creditor
of any Borrower, a liquidator, administrator or trustee in bankruptcy,
recovers from Tranche B Agent any amount found to have been wrongfully paid
to Tranche B Agent or disbursed by Tranche B Agent to Term Loan B Lenders,
then Term Loan B Lenders, in accordance with their respective Aggregate
Percentages, shall reimburse Tranche B Agent for all such amounts.
13.6. Rights and Remedies to be Exercised by Tranche B Agent Only.
-----------------------------------------------------------
Each Term Loan B Lender agrees that no Term Loan B Lender shall
have any right individually (i) to realize upon the security created
by this Agreement or any other Loan Document, (ii) to enforce any provision
of this Agreement or any other Loan Document that does not run directly to
the benefit of such Term Loan B Lender, or (iii) to make demand of Borrower
under this Agreement or any other Loan Document.
13.7. Agency Provisions Relating to Collateral.
----------------------------------------
Each Term Loan B Lender authorizes and ratifies Tranche B Agent's entry
into this Agreement for the benefit of Term Loan B Lenders. Each Term Loan B
Lender agrees that any action directed by Tranche B Agent with respect to
the Collateral in accordance with the provisions of this Agreement and the
exercise by Tranche B Agent of the powers set forth herein or therein,
together with such other powers as are reasonably incidental thereto, shall
be authorized and binding upon all Term Loan B Lenders. Tranche B Agent
shall have no obligation whatsoever to any Term Loan B Lender or to any
other Person to assure that the Collateral exists or is owned by any
Borrower or is cared for, protected or insured or has been encumbered or
that the Liens granted to Agent herein or pursuant to the Security Documents
have been properly or sufficiently or lawfully created, perfected, protected
or enforced or are entitled to any particular priority, or to exercise at
all or in any particular manner or under any duty of care, disclosure or
fidelity.
-89-
13.8. Tranche B Agent's Right to Purchase Commitments.
-----------------------------------------------
Tranche B Agent shall have the right, but shall not be obligated, at
any time upon written notice to any Term Loan B Lender and with the consent
of such Term Loan B Lender, which may be granted or withheld in such Term
Loan B Lender's sole discretion, to purchase for Tranche B Agent's own
account all of such Term Loan B Lender's interests in this Agreement, the
other Loan Documents and the Obligations, for the face amount of the
outstanding Obligations owed to such Term Loan B Lender, including without
limitation all accrued and unpaid interest and fees.
13.9. Resignation of Tranche B Agent; Appointment of Successor.
--------------------------------------------------------
Subject to the appointment of a successor Tranche B Agent in the manner
set forth below and the acceptance of such appointment by such successor
Tranche B Agent, Tranche B Agent may resign as Tranche B Agent by giving not
less than thirty (30) days' prior written notice to Term Loan B Lenders and
Borrowers. If Tranche B Agent shall resign under this Agreement, then, (i)
subject to the consent of Borrowers (which consent shall not be unreasonably
withheld and which consent shall not be required during any period in which
a Default or an Event of Default exists), Majority Term Loan B Lenders shall
appoint from among Term Loan B Lenders a successor agent for Term Loan B
Lenders or (ii) if a successor agent shall not be so appointed and approved
within the thirty (30) day period following Tranche B Agent's notice to Term
Loan B Lenders and Borrowers of its resignation, then Tranche B Agent shall
appoint a successor agent who shall serve as Agent until such time as
Majority Term Loan B Lenders appoint a successor agent, subject to
Borrowers' consent as set forth above. Upon its appointment, such successor
agent shall succeed to the rights, powers and duties of Tranche B Agent and
the term "Tranche B Agent" shall mean such successor effective upon its
appointment, and the former Tranche B Agent's rights, powers and duties as
Tranche B Agent shall be terminated without any other or further act or deed
on the part of such former Tranche B Agent or any of the parties to this
Agreement. After the resignation of any Tranche B Agent hereunder, the
provisions of this Section 13 shall inure to the benefit of such former
Tranche B Agent and such former Tranche B Agent shall not by reason of such
resignation be deemed to be released from liability for any actions taken or
not taken by it while it was an Tranche B Agent under this Agreement.
13.10. Information Sharing.
-------------------
Tranche B Agent agrees to provide each Term Loan B Lender, as promptly
as reasonably practicable after receipt thereof by Tranche B Agent, with
copies of each notice received by Tranche B Agent under subsection 8.1.2,
each accountants' letter or Compliance Certificate received by Tranche B
Agent under subsection 8.1.3, each Borrowing Base Certificate received by
Tranche B Agent under subsection 8.1.4, the Projections received by Tranche
B Agent under subsection 8.1.6 and any other material information requested
by such Term Loan B Lender from time to time.
-90-
13.11. Rights of Term Loan B Lenders.
-----------------------------
Except as otherwise expressly set forth in this Agreement, Tranche B
Agent shall not have the right to amend, modify, waive or consent to any
departure from any provision of this Agreement or any other Loan Document on
behalf of any Term Loan B Lender or exercise any other right or remedy
afforded to any Term Loan B Lender on behalf of any such Term Loan B Lender.
-91-
IN WITNESS WHEREOF, this Agreement has been duly executed on the
day and year specified at the beginning of this Agreement.
FALCON PRODUCTS, INC.
By________________________________________________
Title_____________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INDUSTRIES, INC.
By________________________________________________
Title_____________________________________________
SELLERS & ▇▇▇▇▇▇▇▇▇ INC.
By________________________________________________
Title_____________________________________________
FLEET CAPITAL CORPORATION, as Agent
and as a Revolving Credit and Term Loan A Lender
By________________________________________________
Title_____________________________________________
Revolving Loan Commitment: $33,769,000
Term Loan A Commitment: $6,231,000
Signature Pages to Loan Agreement
BACK BAY CAPITAL FUNDING LLC,
as a Term Loan B Lender an as Tranche B Agent
By________________________________________________
Title_____________________________________________
Address: ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
Managing Director
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Term Loan B Commitment: $20,000,000
Signature Pages to Loan Agreement
GB RETAIL FUNDING, LLC,
as a Term Loan B Lender
By________________________________________________
Title_____________________________________________
Address: ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Term Loan B Commitment: $3,000,000
Signature Pages to Loan Agreement
FORTRESS CREDIT OPPORTUNITIES I LP,
as a Term Loan B Lender
By________________________________________________
Title_____________________________________________
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Term Loan B Commitment: $3,500,000
Signature Pages to Loan Agreement
HILCO CAPITAL LP,
as a Term Loan B Lender
By________________________________________________
Title_____________________________________________
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Term Loan B Commitment: $5,000,000
Signature Pages to Loan Agreement
HIGHBRIDGE/▇▇▇▇▇ SPECIAL OPPORTUNITIES FUND, L.P.,
as a Term Loan B Lender
By________________________________________________
Title_____________________________________________
Address: ▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Term Loan B Commitment: $3,500,000
Signature Pages to Loan Agreement
APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of
June 3, 2003, by and among FLEET CAPITAL CORPORATION, individually and as
Agent, the other financial institutions which are or become parties thereto
and FALCON PRODUCTS, INC., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INDUSTRIES, INC., and SELLERS &
▇▇▇▇▇▇▇▇▇ INC., (a) the terms Account, Certificated Security, Chattel Paper,
------- --------------------- -------------
Commercial Tort Claims, Deposit Account, Document, Electronic Chattel Paper,
---------------------- --------------- -------- ------------------------
Equipment, Financial Asset, Fixture, General Intangibles, Goods,
--------- --------------- ------- ------------------- -----
Instruments, Inventory, Investment Property, Letter-of-Credit Rights,
----------- --------- ------------------- -----------------------
Payment Intangibles, Proceeds, Security, Security Entitlement, Software,
------------------- -------- -------- -------------------- --------
Supporting Obligations, Tangible Chattel Paper and Uncertificated Security
---------------------- ---------------------- -----------------------
have the respective meanings assigned thereto under the UCC; (b) all terms
reflecting Collateral having the meanings assigned thereto under the UCC
shall be deemed to mean such Property, whether now owned or hereafter
created or acquired by any Borrower or in which such Borrower now has or
hereafter acquires any interest; (c) capitalized terms which are not
otherwise defined have the respective meanings assigned thereto in said Loan
and Security Agreement; and (d) the following terms shall have the following
meanings (terms defined in the singular to have the same meaning when used
in the plural and vice versa):
Account Debtor - any Person who is or may become obligated
--------------
under or on account of any Account, Contract Right, Chattel Paper
or General Intangible.
Action Notice - a written notice from Majority Term Loan B
-------------
Lenders to Agent stating that a Level 1 Event of Default or a Level
2 Event of Default is in existence (and identifying such Level 1
Event of Default or Level 2 Event of Default) and that an Action
Standstill Period is being commenced.
Action Standstill Period - the thirty (30) or ninety (90)
------------------------
day period, as applicable, commenced with the receipt by Agent of
any Action Notice, as described in subsection 10.2(c) of the
Agreement.
Affiliate - a Person (other than a Subsidiary): (i) which
---------
directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, a Person;
(ii) which beneficially owns or holds 5% or more of any class of
the Voting Stock of a Person; or (iii) 5% or more of the Voting
Stock (or in the case of a Person which is not a corporation, 5% or
more of the equity interest) of which is beneficially owned or held
by a Person or a Subsidiary of a Person.
Agent - Fleet Capital Corporation in its capacity as agent
-----
for the Lenders under the Agreement and any successor in that
capacity appointed pursuant to subsection 11.11 of the Agreement.
Agent Loans - as defined in subsection 1.1.4 of the
-----------
Agreement.
Aggregate Percentage - with respect to each Lender, the
--------------------
percentage equal to the quotient of (i) such Lender's Loan
Commitment divided by (ii) the aggregate of all Loan Commitments.
-------
Agreement - the Loan and Security Agreement referred to in
---------
the first sentence of this Appendix A, all Exhibits thereto and
this Appendix A, as each of the same may be amended from time to
time.
Applicable Margin - the percentages set forth below with
-----------------
respect to the Base Rate Revolving Portion, the Base Rate Term A
Portion, the LIBOR Revolving Portion, the LIBOR Term A Portion and
the Unused Line Fee:
Base Rate Revolving Portion 0.75%
Base Rate Term A Portion 1.00%
LIBOR Revolving Portion 2.75%
LIBOR Term A Portion 3.00%
Assignment and Acceptance Agreement - an assignment and
-----------------------------------
acceptance agreement in form and content reasonably acceptable to
Agent pursuant to which a Lender assigns to another Lender all or
any portion of any of such Lender's Revolving Loan Commitment, Term
Loan A Commitment or Term Loan B Commitment and/or Loans, as
permitted pursuant to the terms of this Agreement.
Availability - the amount of additional money which
------------
Borrowers are entitled to borrow from time to time as Revolving
Credit Loans, such amount being the difference derived when the sum
of (i) the principal amount of Revolving Credit Loans then
outstanding (including any amounts which Agent or any Revolving
Credit and Term Loan A Lender may have paid for the account of any
Borrower pursuant to any of the Loan Documents and which have not
been reimbursed by Borrowers), (ii) the LC Amount, (iii) any
reserves, and (iv) the aggregate amount of the trade payables of
each Borrower and each Subsidiary that are outstanding more than
thirty (30) days past the due date thereof, is subtracted from the
Borrowing Base. If the amount outstanding is equal to or greater
than the Borrowing Base, Availability is 0.
Back Bay - Back Bay Capital Funding LLC.
--------
Bank - Fleet National Bank.
----
Base Rate - the rate of interest announced or quoted by
---------
Bank from time to time as its prime rate for commercial loans,
whether or not such rate is the lowest rate charged by Bank to its
most preferred borrowers; and, if such prime rate for commercial
loans is discontinued by Bank as a standard, a comparable reference
rate designated by Bank as a substitute therefor shall be the Base
Rate.
Base Rate Portion - a Base Rate Term A Portion or a Base
-----------------
Rate Revolving Portion.
A-2
Base Rate Revolving Portion - that portion of the
---------------------------
Revolving Credit Loans that is not subject to a LIBOR Option.
Base Rate Term A Portion - that portion of Term Loan A
------------------------
that is not subject to a LIBOR Option.
Borrowing Base - as at any date of determination thereof,
--------------
an amount equal to the lesser of:
(i) the Revolving Credit Maximum Amount; or
(ii) an amount equal to the sum of:
(a) 85% of the net amount of Eligible Accounts
outstanding at such date; plus
----
(b) the least of (i) $17,500,000, (ii) the sum of
(A) 70% of the value of Eligible Inventory
consisting of finished goods at such date, plus
----
(B) 40% of the value of Eligible Inventory
consisting of work in process at such date,
plus (C) 25% of Eligible Inventory consisting
----
of raw materials at such date, or (iii) the
sum of (A) 85% of the net orderly liquidation
percentage of each category or type of Eligible
Inventory consisting of finished goods and raw
materials at such date, plus (B) 75% of the net
----
orderly liquidation percentage of each
category or type of Eligible Inventory
consisting of work in process at such date;
provided, that in no event shall the portion
of the Borrowing Base predicated on Eligible
Inventory consisting of (x) finished goods
exceed $7,500,000, (y) raw materials exceed
$7,500,000 or (z) work-in-process exceed
$6,000,000.
For purposes hereof, (1) the net amount of Eligible
Accounts at any time shall be the face amount of such Eligible
Accounts less any and all returns, rebates, discounts (which may,
at Agent's option, be calculated on shortest terms), credits,
allowances or excise taxes of any nature at any time issued, owing,
claimed by Account Debtors, granted, outstanding or payable in
connection with such Accounts at such time, (2) the amount of
Eligible Inventory shall be determined on a first-in, first-out,
lower of cost or market basis in accordance with GAAP, and (3) the
net orderly liquidation percentage of each category or type of
Eligible Inventory shall be determined by Hilco Appraisal Services
LLC or another appraiser reasonably acceptable to Majority Lenders
and shall be as reflected in the most recent Inventory appraisal
delivered to Agent under this Agreement. If a fully costed
perpetual inventory system reasonably acceptable to Agent with
respect to finished goods Inventory of each Borrower is not in
place by October 31, 2003, the advance rates set forth above for
Eligible Inventory consisting of finished goods shall be reduced by
A-3
1% on the first date of each month commencing November 1, 2003, on
a cumulative basis, until such a system is in place. In addition,
for purposes of computing the amount of the Borrowing Base, the
gross amount of Eligible Accounts shall be reduced by the aggregate
amount of cash proceeds of Eligible Accounts received by any
Borrower but not yet applied to specific Eligible Accounts.
Borrowing Base Certificate - a certificate by a
--------------------------
responsible officer of Falcon, substantially in the form of
Exhibit 8.1.4 (or another form reasonably acceptable to Agent) setting
-------------
forth the calculation of the Borrowing Base, including a
calculation of each component thereof, all in such detail as shall
be reasonably satisfactory to Agent. All calculations of the
Borrowing Base, in connection with the preparation of any Borrowing
Base Certificate shall originally be made by Falcon and certified
to Agent; provided, that Agent shall have the right to review and
adjust, in the exercise of its reasonable credit judgment, any such
calculation after giving notice thereof to Falcon, (1) to reflect
its reasonable estimate of declines in value of any of the
Collateral described therein, and (2) to the extent that Agent
determines that such calculation is not in accordance with this
Agreement.
Business Day - any day excluding Saturday, Sunday and any
------------
day which is a legal holiday under the laws of the State of
Wisconsin, the State of Connecticut, or the State of Illinois or is
a day on which banking institutions located in either of such
states are closed.
Buyout - the purchase by Tranche B Agent (and such other
------
Persons as are acceptable to Tranche B Agent) at face amount, of
100% of the Obligations, other than (a) any prepayment fees payable
to Revolving Credit and Term Loan A Lenders pursuant to subsection
2.6(a) and (b) any Obligations in respect of Term Loan B or
otherwise owing to any Term Loan B Lender.
Buyout Notice - a written notice by Tranche B Agent to
-------------
Agent stating that Tranche B Agent wishes to exercise its option to
consummate a Buyout, and setting forth the basis on which Tranche B
Agent is entitled to exercise such Buyout right.
Capital Expenditures - expenditures made or liabilities
--------------------
incurred for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a
useful life of more than one year, including the total principal
portion of Capitalized Lease Obligations.
Capitalized Lease Obligation - any Indebtedness
----------------------------
represented by obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with
GAAP.
Closing Date - the date on which all of the conditions
------------
precedent in Section 9 of the Agreement are satisfied or waived and
the initial Loan is made or the initial Letter of Credit or LC
Guaranty is issued under the Agreement.
A-4
Collateral - all of the Property and interests in Property
----------
described in Section 5 of the Agreement, and all other Property and
interests in Property that now or hereafter secure the payment and
performance of any of the Obligations.
Compliance Certificate - as defined in subsection 8.1.3 of
----------------------
the Agreement.
Computer Hardware and Software - all of each Borrower's
------------------------------
rights (including rights as licensee and lessee) with respect to
(i) computer and other electronic data processing hardware,
including all integrated computer systems, central processing
units, memory units, display terminals, printers, computer
elements, card readers, tape drives, hard and soft disk drives,
cables, electrical supply hardware, generators, power equalizers,
accessories, peripheral devices and other related computer
hardware; (ii) all Software and all software programs designed for
use on the computers and electronic data processing hardware
described in clause (i) above, including all operating system
software, utilities and application programs in any form (source
code and object code in magnetic tape, disk or hard copy format or
any other listings whatsoever); (iii) any firmware associated with
any of the foregoing; and (iv) any documentation for hardware,
Software and firmware described in clauses (i), (ii) and (iii)
above, including flow charts, logic diagrams, manuals,
specifications, training materials, charts and pseudo codes.
Consolidated - the consolidation in accordance with GAAP
------------
of the accounts or other items as to which such term applies.
Contract Right - any right of any Borrower to payment
--------------
under a contract for the sale or lease of goods or the rendering of
services, which right is at the time not yet earned by performance.
Credit Agreement - as defined in the Subordinated Note
----------------
Indenture, as in existence on the Closing Date.
Credit Facilities - as defined in the Subordinated Note
-----------------
Indenture, as in existence on the Closing Date.
Current Assets - at any date means the amount at which all
--------------
of the current assets of a Person would be properly classified as
current assets shown on a balance sheet at such date in accordance
with GAAP.
Default - an event or condition the occurrence of which
-------
would, with the lapse of time or the giving of notice, or both,
become an Event of Default.
Default Rate - the Tranche A Default Rate or the Tranche B
------------
Default Rate, as applicable.
Derivative Obligations - every obligation of a Person
----------------------
under any forward contract, futures contract, exchange contract,
swap, option or other financing agreement or arrangement
(including, without limitation, caps, floors, collars and
A-5
similar agreement), the value of which is dependent upon interest
rates, currency exchange rates, commodities or other indices.
Designated Senior Debt - as defined in the Subordinated
----------------------
Note Indenture, as in existence on the Closing Date.
Distribution - in respect of any Person means and
------------
includes: (i) the payment of any dividends or other distributions
on Securities of such Person (except distributions in such
Securities) and (ii) the redemption or acquisition of Securities of
such Person, including the acquisition of Securities of Epic by
Falcon, as the case may be, unless made contemporaneously from the
net proceeds of the sale of Securities.
Domestic Subsidiary - any now or hereafter existing
-------------------
Subsidiary of any Borrower that is incorporated under the laws of a
State of the United States or the District of Columbia.
Dominion Account - a special bank account or accounts of
----------------
Agent established by a Borrower pursuant to subsection 6.2.4 of the
Agreement at banks selected by such Borrower, but acceptable to
Agent in its reasonable discretion, and over which Agent shall have
sole and exclusive access and control for withdrawal purposes.
Eligible Account - an Account arising in the ordinary
----------------
course of the business of a Borrower from the sale of goods or
rendition of services which Agent, in its reasonable credit
judgment, deems to be an Eligible Account. Without limiting the
generality of the foregoing, no Account shall be an Eligible
Account if:
(i) it arises out of a sale made or services
rendered by a Borrower to a Subsidiary of a Borrower or an
Affiliate of Borrower or to a Person controlled by an
Affiliate of a Borrower and does not arise from
installation work or constitute a retainage; or
(ii) it remains unpaid more than ninety (90) days
after the original invoice date shown on the invoice; or
(iii) the total unpaid Accounts of the Account
Debtor exceed 20% of the net amount of all Eligible
Accounts, but only to the extent of such excess; or
(iv) any covenant, representation or warranty
contained in the Agreement with respect to such Account
has been breached; or
(v) the Account Debtor is also a creditor or
supplier of a Borrower or any Subsidiary of a Borrower or
has provided an advance deposit in respect of any order to
a Borrower or any Subsidiary of a Borrower, or the Account
Debtor has disputed liability with respect to such
Account, or the Account Debtor has made any claim with
respect to any other Account due from such Account Debtor
to a Borrower or any Subsidiary of a Borrower, or the
A-6
Account otherwise is or may become subject to right of
setoff by the Account Debtor, provided, that any such
--------
Account shall be eligible to the extent such amount
thereof exceeds such contract, deposit, dispute, claim,
setoff or similar right; or
(vi) the Account Debtor has commenced a voluntary
case under the federal bankruptcy laws, as now constituted
or hereafter amended, or made an assignment for the
benefit of creditors, or a decree or order for relief has
been entered by a court having jurisdiction in the
premises in respect of the Account Debtor in an
involuntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or any other petition or
other application for relief under the federal bankruptcy
laws, as now constituted or hereafter amended, has been
filed against the Account Debtor, or if the Account Debtor
has failed, suspended business, ceased to be Solvent, or
consented to or suffered a receiver, trustee, liquidator
or custodian to be appointed for it or for all or a
significant portion of its assets or affairs; or
(vii) it arises from a sale made or services
rendered to an Account Debtor outside the United States,
unless the sale is either (1) to an Account Debtor located
in Ontario or any other province of Canada in which the
Personal Property Security Act has been adopted in
substantially the same form as currently in effect in
Ontario or (2) on letter of credit, guaranty or acceptance
terms, in each case acceptable to Agent in its reasonable
credit judgment; or
(viii) (1) it arises from a sale to the Account
Debtor on a ▇▇▇▇-and-hold, guaranteed sale,
sale-or-return, sale-on-approval, consignment, or any
other repurchase or return basis; or (2) it is subject to
a reserve established by a Borrower for potential returns
or refunds, to the extent of such reserve; or
(ix) the Account Debtor is the United States of
America or any department, agency or instrumentality
thereof, unless the applicable Borrower assigns its right
to payment of such Account to Agent, in a manner
satisfactory to Agent, in its reasonable credit judgment,
so as to comply with the Assignment of Claims Act of 1940
(31 U.S.C. section 203 et seq., as amended); or
-- ----
(x) it is not at all times subject to Agent's
duly perfected, first priority security interest or is
subject to a Lien that is not a Permitted Lien; or
(xi) the goods giving rise to such Account have
not been delivered to and accepted by the Account Debtor
or the services giving rise to such Account have not been
performed by the applicable Borrower and accepted by the
Account Debtor or the Account otherwise does not represent
a final sale; or
A-7
(xii) the Account is evidenced by chattel paper
or an instrument of any kind, or has been reduced to
judgment; or
(xiii) a Borrower or a Subsidiary of a Borrower
has made any agreement with the Account Debtor for any
extension, compromise, settlement or modification of the
Account or deduction therefrom, except for discounts or
allowances which are made in the ordinary course of
business for prompt payment and which discounts or
allowances are reflected in the calculation of the face
value of each invoice related to such Account; or
(xiv) 25% or more of the Accounts owing from the
Account Debtor are not Eligible Accounts hereunder; or
(xv) a Borrower has made an agreement with the
Account Debtor to extend the time of payment thereof; or
(xvi) it represents service charges, late fees or
similar charges; or
(xvii) it consists of installation charges or fees;
(xviii) the applicable Borrower was required to
post a performance or other surety bond (other than a bid
bond) in connection with such Account; or
(ix) it is not otherwise acceptable to Agent in
its reasonable credit judgment.
Eligible Inventory - Inventory of a Borrower (other than
------------------
packaging materials and supplies, shipping containers, tooling,
samples, displays and literature) which Agent, in its reasonable
credit judgment, deems to be Eligible Inventory. Without limiting
the generality of the foregoing, no Inventory shall be Eligible
Inventory if:
(i) it is not raw materials, work in process or
finished goods which meet the specifications of the
purchase order or contract for such Inventory, if any; or
(ii) it is not in good, new and saleable
condition; or
(iii) it is slow-moving, obsolete or
unmerchantable; or
(iv) it does not meet all standards imposed by
any governmental agency or authority; or
(v) it does not conform in all material respects
to any covenants, warranties and representations set forth
in the Agreement; or
(vi) it is not at all times subject to Agent's
duly perfected, first priority security interest or is
subject to a Lien that is not a Permitted Lien; or
A-8
(vii) it is not situated at a location in
compliance with the Agreement, provided that Inventory
--------
situated at a location not owned by a Borrower will be
Eligible Inventory only if Agent has received a
satisfactory landlord's agreement, bailee's letter or
processor's letter, as applicable, with respect to such
location; or
(viii) it is located outside of the continental
United States of America; or
(ix) it is in transit; or
(x) it is work in process Inventory of Sellers &
▇▇▇▇▇▇▇▇▇; or
(xi) it is not otherwise acceptable to Agent in
its reasonable credit judgment.
Environmental Laws - all federal, state and local laws,
------------------
rules, regulations, ordinances, orders and consent decrees relating
to health, safety and environmental matters.
Epic - Epic Furniture Group, Inc.
----
ERISA - the Employee Retirement Income Security Act of
-----
1974, as amended, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
Event of Default - as defined in Section 10.1 of the
----------------
Agreement.
Excess Advance - any Revolving Credit Loan advanced by
--------------
Agent or any Lender at a time when Availability (calculated without
reference to clause (iv) of the definition of such term) is zero
and Agent is not permitted to make any additional Overadvances
under subsection 1.1.2 of the Agreement.
Excess Cash Flow - with respect to any fiscal year of
----------------
Borrowers, commencing with the fiscal year ending November 1, 2003,
30% of the amount equal to the result of (i) EBITDA for such
period, minus (ii) Interest Expense paid or required to be paid in
cash during such period, minus (iii) the non-financed portion of
Capital Expenditures made during such period, minus (iv) income
taxes paid or required to be paid in cash during such period, minus
(v) scheduled principal payments on Indebtedness made or required
to be made during such period, minus (vi) cash payments made during
such period in respect of non-cash reserves taken in prior periods,
minus (vii) Distributions made during such period.
Excluded Property - with respect to any Person, (a) any
-----------------
Property which is subject to a Purchase Money Lien permitted by
subsection 8.2.5(iv) of the Agreement or a Permitted Capital Lease
Obligation permitted by subsection 8.2.5(v) of the Agreement, in
any case pursuant to agreements that prohibit such Person from
A-9
granting any other Liens in such Property, (b) any Property leased
by such Person (as lessee) under a lease to the extent such lease
prohibits such Person from granting any Liens on such Property, (c)
any general intangible, instrument, software, license, permit,
lease, contract, governmental approval or franchise (but not the
proceeds thereof), if the grant of a Lien in such general
intangible, instrument, software, license, permit, lease, contract,
governmental approval or franchise in the manner contemplated by
the Loan Documents is prohibited by the terms of such general
intangible, instrument, software, license, permit, lease, contract,
governmental approval or franchise and would result in the
termination of such general intangible, instrument, software,
license, permit, lease, contract, governmental approval or
franchise, but only to the extent that any such prohibition is not
rendered ineffective pursuant to the Uniform Commercial Code or any
other applicable law, (d) "intent-to-use" trademarks at all times
prior to the first use thereof, whether by the actual use thereof
in commerce, the recording of a statement of use with the United
States Patent and Trademark Office or otherwise, and, (e) any
Securities of any Foreign Subsidiary owned by such Person to the
extent they exceed 65% of the outstanding Securities of such
Foreign Subsidiary owned by such Person.
Fee Letter - as defined in Section 2.3 of the Agreement.
----------
Fixed Assets - Equipment and real Property of each
------------
Borrower and each Subsidiary.
Foreign Subsidiary - any Subsidiary that is not a Domestic
------------------
Subsidiary.
GAAP - generally accepted accounting principles in the
----
United States of America in effect from time to time.
Guarantors - each Person who now or hereafter guarantees
----------
payment or performance of the whole or any part of the Obligations.
Guaranty Agreements - each guaranty now or hereafter
-------------------
executed by any Guarantor.
Indebtedness - as applied to a Person means, without
------------
duplication:
(i) all items which in accordance with GAAP would
be included in determining total liabilities as shown on
the liability side of a balance sheet of such Person as at
the date as of which Indebtedness is to be determined,
including, without limitation, Capitalized Lease
Obligations;
(ii) all obligations of other Persons which such
Person has guaranteed;
(iii) all reimbursement obligations in connection
with letters of credit or letter of credit guaranties
issued for the account of such Person;
A-10
(iv) Derivative Obligations; and
(v) in the case of Borrowers (without
duplication), the Obligations.
Insolvency Proceeding - any proceeding commenced by or
---------------------
against any Person under any provision of the United States
Bankruptcy Code, as amended, or any successor statute or under any
other applicable bankruptcy or insolvency law, assignments for the
benefit of creditors, formal or informal moratoria, compositions,
or extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.
Intellectual Property - all past, present and future:
---------------------
trade secrets, know-how and other proprietary information;
trademarks, internet domain names, service marks, trade dress,
trade names, business names, designs, logos, slogans (and all
translations, adaptations, derivations and combinations of the
foregoing) indicia and other source and/or business identifiers,
and the goodwill of the business relating thereto and all
registrations or applications for registrations which have
heretofore been or may hereafter be issued thereon throughout the
world; copyrights (including copyrights for computer programs) and
copyright registrations or applications for registrations which
have heretofore been or may hereafter be issued throughout the
world and all tangible property embodying the copyrights,
unpatented inventions (whether or not patentable); patent
applications and patents; industrial design applications and
registered industrial designs; license agreements related to any of
the foregoing and income therefrom; books, records, writings,
computer tapes or disks, flow diagrams, specification sheets,
computer software, source codes, object codes, executable code,
data, databases and other physical manifestations, embodiments or
incorporations of any of the foregoing; the right to ▇▇▇ for all
past, present and future infringements of any of the foregoing; all
other intellectual property; and all common law and other rights
throughout the world in and to all of the foregoing.
Intellectual Property Security Agreements - collectively,
-----------------------------------------
each Trademark Security Agreement, Patent Security Agreement,
Copyright Security Agreement or similar agreement now or hereafter
executed by any Person, whereby such Person grants to Agent, for
the benefit of itself and Lenders, as security for the Obligations,
a Lien upon any portion of the Intellectual Property of such
Person.
Interest Period - as applicable to any LIBOR Portion, a
---------------
period commencing on the date such LIBOR Portion is advanced,
continued or converted, and ending on the date which is one (1)
month, two (2) months, three (3) months, or six (6) months later,
as may then be requested by a Borrower; provided, that (i) any
--------
Interest Period which would otherwise end on a day which is not a
Business Day shall end in the next preceding or succeeding Business
Day as is Agent's custom in the market to which such LIBOR Portion
relates, as communicated to Borrowers from time to time; (ii) there
remains a minimum of one (1) month, two (2) months, three
(3) months or six (6) months (depending upon which Interest Period a
Borrower selects) in the Term, unless Borrowers and Lenders have
agreed to an extension of the Term beyond
A-11
the expiration of the Interest Period in question; and (iii) all
Interest Periods of the same duration which commence on the same
date shall end on the same date.
Key Default - as defined in subsection 3.11.1 of the
-----------
Agreement.
LC Amount - at any time, the aggregate undrawn face amount
---------
of all Letters of Credit and LC Guaranties then outstanding.
LC Guaranty - any guaranty pursuant to which Agent or any
-----------
Affiliate of Agent shall guaranty the payment or performance by a
Borrower of its reimbursement obligation under any letter of
credit.
LC Obligations - Any Obligations that arise from any draw
--------------
against any Letter of Credit or against any letter of credit
supported by an LC Guaranty.
Letter of Credit - any standby or documentary letter of
----------------
credit issued by Agent or any Affiliate of Agent for the account of
a Borrower.
Level 1 Event of Default - either (a) an Event of Default
------------------------
under any of (i) subsection 10.1.1 of the Agreement (other than in
respect of an Overadvance), (ii) subsection 10.1.1 of the
Agreement, due to the failure by Borrowers to repay an Overadvance
that exceeds the applicable limits set forth in subsection 1.1.2 or
the repayment of which has been demanded by Agent or Majority
Lenders, (iii) subsection 10.1.3 of the Agreement, due to a breach
of subsection 8.3 of the Agreement, (iv) subsection 10.1.3 of the
Agreement due to a breach of subsection 8.1.11 of the Agreement, or
(v) subsection 10.1.3 of the Agreement, due to a beach of either
subsection 8.1.3(i) or (ii) of the Agreement, or the failure of
Borrowers to timely deliver any Compliance Certificate required
pursuant to subsection 8.1.3 of the Agreement (in each case, after
expiration of the applicable cure period contained in subsection
10.1.3 of the Agreement) or (b) the refusal of Revolving Credit and
Term Loan A Lenders to fund two successive requests by Borrowers
for Revolving Credit Loans, Letters of Credit or LC Guaranties.
Level 2 Event of Default - an Event of Default other than
------------------------
a Level 1 Event of Default.
LIBOR - as applicable to any LIBOR Portion, for the
-----
applicable Interest Period, the rate per annum (rounded upward, if
necessary, to the nearest 1/8 of one percent) as determined on the
basis of the offered rates for deposits in U.S. dollars, for a
period of time comparable to such Interest Period which appears on
the Telerate page 3750 as of 11:00 a.m. (London time) on the day
that is two (2) London Banking Days preceding the first day of such
Interest Period; provided, however, if the rate described above
does not appear on the Telerate System on any applicable interest
determination date, the LIBOR shall be the rate (rounded upwards as
described above, if necessary) for deposits in U.S. dollars for a
period substantially equal to the Interest Period on the Reuters
Page "LIBO" (or such other page as may replace the LIBO
A-12
Page on that service for the purpose of displaying such rates), as
of 11:00 a.m. (London Time), on the day that is two (2) London
Banking Days prior to the first day of such Interest Period. If
both the Telerate and Reuters systems are unavailable, then the
rate for that date will be determined on the basis of the offered
rates for deposits in U.S. dollars for a period of time comparable
to such Interest Period which are offered by four (4) major banks
in the London interbank market at approximately 11:00 a.m. (London
time), on the day that is two (2) London Banking Days preceding
the first day of such Interest Period as selected by Agent. The
principal London office of each of the major London banks so
selected will be requested to provide a quotation of its U.S.
dollar deposit offered rate. If at least two (2) such quotations
are provided, the rate for that date will be the arithmetic mean
of the quotations. If fewer than two quotations are provided as
requested, the rate for that date will be determined on the basis
of the rates quoted for loans in U.S. dollars to leading European
banks for a period of time comparable to such Interest Period
offered by major banks in New York City at approximately 11:00
a.m. (New York City time), on the day that is two (2) London
Banking Days preceding the first day of such Interest Period. In
the event that Agent is unable to obtain any such quotation as
provided above, it will be determined that LIBOR pursuant to a
Interest Period cannot be determined. In the event that the Board
of Governors of the Federal Reserve System shall impose a Reserve
Percentage with respect to LIBOR deposits of Bank then for any
period during which such Reserve Percentage shall apply, LIBOR
shall be equal to the amount determined above divided by an amount
equal to 1 minus the Reserve Percentage.
LIBOR Interest Payment Date - the first day of each
---------------------------
calendar month during and immediately following the applicable
Interest Period.
LIBOR Option - the option granted pursuant to Section 3.1
------------
of the Agreement to have the interest on all or any portion of the
principal amount of the Revolving Credit Loans or Term Loan A based
on the LIBOR.
LIBOR Portion - a LIBOR Revolving Portion or a LIBOR Term
-------------
A Portion.
LIBOR Request - a notice in writing (or by telephone
-------------
confirmed electronically or by telecopy or other facsimile
transmission on the same day as the telephone request) from a
Borrower to Agent requesting that interest on a Revolving Credit
Loan or all or any portion of Term Loan A be based on the LIBOR,
specifying: (i) the first day of the Interest Period (which shall
be a Business Day); (ii) the length of the Interest Period; (iii)
whether the LIBOR Portion is a new Loan, a conversion of a Base
Rate Portion, or a continuation of a LIBOR Portion, and (iv) the
dollar amount of the LIBOR Revolving Portion or LIBOR Term A
Portion, which shall be in an amount not less than $1,000,000 or an
integral multiple of $100,000 in excess thereof.
LIBOR Revolving Portion - that portion of the Revolving
-----------------------
Credit Loans specified in a LIBOR Request (including any portion of
Revolving Credit Loans which is being borrowed by a Borrower
concurrently with such LIBOR Request)
A-13
which, as of the date of the LIBOR Request specifying such LIBOR
Revolving Portion, has met the conditions for basing interest on
the LIBOR in Section 3.1 of the Agreement and the Interest Period
of which has not terminated.
LIBOR Term A Portion - that portion of Term Loan A
--------------------
specified in a LIBOR Request which, as of the date of the LIBOR
Request specifying such LIBOR Term A Portion, has met the
conditions for basing interest on the LIBOR in Section 3.1 of the
Agreement and the Interest Period of which has not terminated.
Lien - any interest in Property securing an obligation
----
owed to, or a claim by, a Person other than the owner of the
Property, whether such interest is based on common law, statute or
contract. The term "Lien" shall also include rights of seller under
conditional sales contracts or title retention agreements,
reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property. For the purpose of
the Agreement, a Borrower shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional
sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for
security purposes.
Loan Account - each loan account established on the books
------------
of Agent pursuant to Section 3.6 of the Agreement.
Loan Commitment - with respect to any Lender, the amount
---------------
of such Lender's Revolving Loan Commitment, plus such Lender's Term
----
Loan A Commitment, plus such Lender's Term Loan B Commitment.
----
Loan Documents - the Agreement, the Other Agreements and
--------------
the Security Documents.
Loans - all loans and advances of any kind made by Agent,
-----
any Lender, or any Affiliate of Agent or any Lender, pursuant to
the Agreement.
London Banking Day - any date on which commercial banks
------------------
are open for business in London, England.
Majority Lenders - Revolving Credit and Term Loan A
----------------
Lenders holding 66 2/3% or more of the outstanding Term Loan A and
the Revolving Loan Commitments determined on a combined basis; and
following the termination of the Revolving Loan Commitments,
Lenders holding 51% or more of the outstanding Loans, LC Amounts
and LC Obligations not yet reimbursed by Borrowers or funded with a
Revolving Credit Loan; provided, that (i) in each case, if there
--------
are 2 or less Revolving Credit and Term Loan A Lenders with
outstanding Revolving Credit Loans, LC Amounts, unfunded and
unreimbursed LC Obligations or Revolving Loan Commitments, all
Revolving Credit and Term Loan A Lenders shall be required to
constitute Majority Lenders; and (ii) prior to termination of the
Revolving Loan
A-14
Commitments, if any Revolving Credit and Term Loan A Lender
breaches its obligation to fund any requested Revolving Credit
Loan, for so long as such breach exists, its voting rights
hereunder shall be calculated with reference to its outstanding
Revolving Loans, LC Amounts and unfunded and unreimbursed LC
Obligations, rather than its Revolving Loan Commitment.
Majority Term Loan B Lenders - as of any date, at least
----------------------------
two (2) Term Loan B Lenders holding 51% or more of the outstanding
Term Loan B.
Material Adverse Effect - (i) a material adverse effect on
-----------------------
the business, condition (financial or otherwise), operation,
performance or properties of Borrowers and their Subsidiaries taken
as a whole, (ii) a material adverse effect on the rights and
remedies of Agent or Lenders under the Loan Documents, or (iii) the
material impairment of the ability of Borrowers and the Domestic
Subsidiaries, taken as a whole, to perform their obligations
hereunder or under any Loan Document.
Money Borrowed - means, (i) Indebtedness arising from the
--------------
lending of money by any Person to any Borrower or any Subsidiary;
(ii) Indebtedness, whether or not in any such case arising from the
lending by any Person of money to any Borrower or any Subsidiary,
(1) which is represented by notes payable or drafts accepted that
evidence extensions of credit, (2) which constitutes obligations
evidenced by bonds, debentures, notes or similar instruments, or
(3) upon which interest charges are customarily paid (other than
accounts payable) or that was issued or assumed as full or partial
payment for Property; (iii) Indebtedness that constitutes a
Capitalized Lease Obligation; (iv) reimbursement obligations with
respect to letters of credit or guaranties of letters of credit and
(v) Indebtedness of any Borrower or any Subsidiary under any
guaranty of obligations that would constitute Indebtedness for
Money Borrowed under clauses (i) through (iii) hereof, if owed
directly by a Borrower or any Subsidiary. Money Borrowed shall not
include trade payables or accrued expenses.
Mortgages - (i) the Real Property Deed of Trust,
---------
Assignment of Rents, Security Agreement and Fixture Filing executed
by Shelby on or about the Closing Date in favor of Agent, for the
benefit of itself and Lenders, by which Shelby has granted to
Agent, as security for the Obligations, a Lien upon the real
Property of Shelby located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (ii) the Leasehold and Fee Deed of
Trust, Assignment of Rents and Security Agreement executed by
Falcon on or about the Closing Date in favor of Agent, for the
benefit of itself and Lenders, by which Falcon has granted to
Agent, as security for the Obligations, a Lien upon the leased and
owned real Property of Falcon located at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (iii) the Deed of Trust, Assignment of Rents and
Security Agreement executed by Shelby on or about the Closing Date
in favor of Agent, for the benefit of itself and Lenders, by which
Shelby has granted to Agent, as security for the Obligations, a
Lien upon the real Property of Shelby located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (iv) the Real Property Mortgage and
Security Agreement executed by Falcon on or about Closing Date in
favor of Agent, for the benefit of itself and Lenders, by which
Falcon has granted to Agent, as
A-15
security for the Obligations, a Lien upon the real property of
Falcon located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
and (v) all other mortgages, deeds of trust and comparable
documents now or at any time hereafter securing the whole or any
part of the Obligations.
Multiemployer Plan - has the meaning set forth in Section
------------------
4001(a)(3) of ERISA.
Notes - the Revolving Notes, the Term A Notes and the Term
-----
B Notes.
Obligations - all Loans, all LC Obligations and all other
-----------
advances, debts, liabilities, obligations, covenants and duties,
together with all interest, fees and other charges thereon, owing,
arising, due or payable from each Borrower to Agent, for its own
benefit, from each Borrower to Agent for the benefit of any Lender,
from each Borrower to any Lender and from each Borrower to Bank or
any other Affiliate of Agent, of any kind or nature, present or
future, whether or not evidenced by any note, guaranty or other
instrument, arising under the Agreement or any of the other Loan
Documents (or any agreements evidencing the Product Obligations),
whether direct or indirect (including those acquired by
assignment), absolute or contingent, primary or secondary, due or
to become due, now existing or hereafter arising and however
acquired, and including without limitation any Product Obligations
owing to Agent, Bank or any Affiliate of Bank or Agent.
Organizational I.D. Number - with respect to any Person,
--------------------------
the organizational identification number assigned to such Person by
the applicable governmental unit or agency of the jurisdiction of
organization of such Person.
Other Agreements - any and all agreements, instruments and
----------------
documents (other than the Agreement and the Security Documents),
heretofore, now or hereafter executed by any Borrower, any
Subsidiary, any Guarantor or any other third party and delivered to
Agent or any Lender in respect of the transactions contemplated by
the Agreement.
Other Assets - all Properties of each Borrower and each
------------
Subsidiary, other than Fixed Assets.
Overadvance - as defined in subsection 1.1.2 of the
-----------
Agreement.
Permitted Capital Lease Obligations - Capitalized Lease
-----------------------------------
Obligations of Borrowers and the Subsidiaries incurred after the
date hereof, the aggregate amount of which, when aggregated with
the aggregate amount of all Capitalized Lease Obligations of
Borrowers and the Subsidiaries at the time outstanding, does not
exceed $2,000,000. For the purposes of this definition, the
principal amount of any Purchase Money Indebtedness consisting of
capitalized leases (as opposed to operating leases) shall be
computed as a Capitalized Lease Obligation.
A-16
Permitted Liens - any Lien of a kind specified in
---------------
subsection 8.2.5 of the Agreement.
Permitted Purchase Money Indebtedness - Purchase Money
-------------------------------------
Indebtedness of any Borrower or any Subsidiary of any Borrower
incurred after the date hereof which is secured by a Purchase Money
Lien and the principal amount of which, when aggregated with the
principal amount of all other such Indebtedness of Borrowers and
the Subsidiaries at the time outstanding, does not exceed
$2,000,000.
Person - an individual, partnership, corporation, limited
------
liability company, joint stock company, land trust, business trust,
or unincorporated organization, or a government or agency or
political subdivision thereof.
Plan - an employee benefit plan now or hereafter
----
maintained for employees of any Borrower or any Subsidiary that is
covered by Title IV of ERISA.
Pledge Agreements - (i) the Pledge Agreement executed by
-----------------
Falcon on or about the Closing Date in favor of Agent, for the
benefit of itself and Lenders, by which Falcon has granted to
Agent, as security for the Obligations, a Lien on 100% of the
Securities of each of ▇▇▇▇ Furniture Corporation ("▇▇▇▇"), Falcon
Holdings, Inc., The Falcon Companies International, Inc. and
Shelby, 80% of the Securities of Epic and 65% of the Securities of
Falcon Products China Limited, (ii) the Pledge Agreement executed
by Shelby on or about the Closing Date in favor of Agent, for the
benefit of itself and Lenders, by which Shelby has granted to
Agent, as security for the Obligations, a Lien on 100% of the
Securities of each of Sellers and Madison Furniture Industries,
Inc., (iii) the Pledge Agreement executed by ▇▇▇▇ on or about the
Closing Date in favor of Agent, for the benefit of itself and
Lenders, by which ▇▇▇▇ has granted to Agent, as security for the
Obligations, a Lien on 100% of the Securities of ▇▇▇▇▇▇▇
Industries, Inc., (iv) Agreement on Pledge of Book Entered Shares
executed by Falcon on or about the Closing Date in favor of Agent,
for the benefit of itself and Lenders, by which Falcon has granted
to Agent, as security for the Obligations, a Lien on 65% of the
Securities of Falcon Mimon A.S., (v) the Share Pledge Agreement
executed by ▇▇▇▇ on or about the Closing Date in favor of Agent,
for the benefit of itself and Lenders, by which ▇▇▇▇ has granted to
Agent, as security for the Obligations, a Lien on 65% of the
Securities of ▇▇▇▇ Europe A/S, (vi) the Stock Pledge Contract
executed by Falcon on or about the Closing Date in favor of Agent,
as security for the Obligations, a Lien on 65% of the Securities of
Falcon ▇▇ ▇▇▇▇▇▇, ▇.▇. de C.V., and (vii) all other pledge
agreements and comparable documents now or at any time hereafter
securing the whole or any part of the Obligations.
Product Obligations - every obligation of Borrower under
-------------------
and in respect of any one or more of the following types of
services or facilities extended to any Borrower by Bank, Agent or
any Affiliate of Bank or Agent: (i) cash management or related
services including the automatic clearing house transfer of funds
for the account of any Borrower pursuant to agreement or overdraft,
(ii) cash management, including controlled disbursement services
and (iii) Derivative Obligations.
A-17
Projections - Borrowers' forecasted Consolidated (i)
-----------
balance sheets, (ii) profit and loss statements, and (iii) cash
flow statements, all prepared on a consistent basis with the
historical financial statements of Borrowers and the Subsidiaries,
together with appropriate supporting details and a statement of
underlying assumptions.
Property - any interest in any kind of property or asset,
--------
whether real, personal or mixed, or tangible or intangible.
Purchase Money Indebtedness - means and includes (i)
---------------------------
Indebtedness (other than the Obligations and Capitalized Lease
Obligations) for the payment of all or any part of the purchase
price of any Fixed Assets, (ii) any Indebtedness (other than the
Obligations and Capitalized Lease Obligations) incurred at the time
of or within ten (10) days prior to or after the acquisition of any
Fixed Assets for the purpose of financing all or any part of the
purchase price thereof, and (iii) any renewals, extensions,
refinancings or replacements thereof, but not any increases in the
principal amounts thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which
-------------------
secures Purchase Money Indebtedness, but only if such Lien shall at
all times be confined solely to the Fixed Assets the purchase price
of which was financed through the incurrence of the Purchase Money
Indebtedness secured by such Lien and the proceeds thereof.
Rebuild Reserve - a reserve created under subsection 1.1.1
---------------
of the Agreement in the amount of (a) all proceeds of insured
losses or destruction to Equipment or real Property being held by
Agent pursuant to subsection 3.3.1(a) pending possible repair or
replacement of such Property subject to the original loss or
destruction and (b) all proceeds of dispositions under subsection
8.2.9(iv) being held by Agent pending possible replacement of the
Property subject to the disposition.
Rentals - as defined in subsection 8.2.19 of the
-------
Agreement.
Reportable Event - any of the events set forth in Section
----------------
4043(c) of ERISA.
Required Lenders - Majority Lenders and Majority Term Loan
----------------
B Lenders.
Reserve Percentage - the maximum aggregate reserve
------------------
requirement (including all basic, supplemental, marginal and other
reserves) which is imposed on member banks of the Federal Reserve
System against "Euro-currency Liabilities" as defined in Regulation
D.
Responsible Officer - the chief executive officer,
-------------------
president or chief financial officer of Falcon.
Restricted Investment - any investment made in cash or by
---------------------
delivery of Property to any Person, whether by acquisition of
stock, Indebtedness or other obligation or Security, or by loan,
advance or capital contribution, or otherwise, or in any Property
except the following:
A-18
(i) investments by a Borrower or a Subsidiary of
a Borrower, to the extent existing on the Closing Date, in
one or more Subsidiaries of such Person;
(ii) so long as no Event of Default is then in
existence, investments after the date hereof by a
Borrower or a Domestic Subsidiary of a Borrower in a
Foreign Subsidiary of a Borrower (as loans or equity
investments) the Securities of which are subject to a
Pledge Agreement, in an aggregate amount after the date
hereof for all Foreign Subsidiaries not in excess of
$1,000,000 in any fiscal year or $2,500,000 during the
period since the Closing Date;
(iii) Property to be used in the ordinary course
of business;
(iv) Current Assets arising from the sale of goods
and services in the ordinary course of business of any
Borrower or any Subsidiary;
(v) investments in direct obligations of the
United States of America, or any agency thereof or
obligations guaranteed by the United States of America,
provided that such obligations mature within one year from
--------
the date of acquisition thereof;
(vi) investments in certificates of deposit
maturing within one year from the date of acquisition
and fully insured by the Federal Deposit Insurance
Corporation;
(vii) investments in commercial paper given the
highest rating by a national credit rating agency and
maturing not more than two hundred seventy (270) days
from the date of creation thereof;
(viii) investments in money market, mutual or
similar funds having assets in excess of $100,000,000
and the investments of which are limited to investment
grade securities;
(ix) intercompany loans permitted under
subsections 8.2.2(v), (vi) and (vii) of the Agreement;
(x) investments existing on the date hereof and
listed on Exhibit 8.2.12 hereto;
--------------
(xi) deposit and other bank accounts maintained
by a Borrower or a Subsidiary in the ordinary course of
business, subject, in the case of deposit accounts of a
Borrower or a Domestic Subsidiary, to Dominion Account
agreements reasonably acceptable to Agent;
(xii) other investments in an aggregate amount
of up to $50,000 at any time outstanding;
A-19
(xiii) intercompany accounting entries made in
respect of sales of Inventory and collections of
Accounts in the ordinary course of business;
(xiv) investments by Foreign Subsidiaries in other
Foreign Subsidiaries whose Securities are subject to a
Pledge Agreement; and
(xv) investments otherwise expressly permitted
pursuant to the Agreement.
Restricted Subsidiary - as defined in the Subordinated
---------------------
Note Indenture, as in existence on the Closing Date.
Revolving Credit and Term Loan A Lenders - any Lender with
----------------------------------------
a Revolving Loan Commitment or a Term Loan A Commitment or that
holds any portion of the Revolving Credit Loans or Term Loan A.
Revolving Credit and Term Loan A Obligations - all
--------------------------------------------
Obligations other than Term Loan B Obligations.
Revolving Credit and Term Loan A Termination Date - the
-------------------------------------------------
first date (a) the Loans (other than the Term Loan B) have been
repaid in full and the Revolving Loan Commitments have been
terminated, (b) all other Obligations (other than the Obligations
in respect of the Term Loan B and other than indemnification claims
that have not yet been asserted) and the Revolving Loan Commitments
have been terminated under the Agreement and the other Loan
Documents have been completely discharged, and (c) all Letter of
Credit Obligations have been cash collateralized, canceled or
backed by standby letters of credit in accordance with this
Agreement (in an amount equal to 105% of the LC Amount).
Revolving Credit Loan - a Loan made by any Revolving
---------------------
Credit and Term Loan A Lender pursuant to Section 1.1 of the
Agreement.
Revolving Credit Maximum Amount - $33,769,000, as such
-------------------------------
amount may be reduced from time to time pursuant to the terms of
the Agreement.
Revolving Loan Commitment - with respect to any Lender,
-------------------------
the amount of such Lender's Revolving Loan Commitment pursuant to
subsection 1.1.1 of the Agreement, as set forth below such Lender's
name on the signature page hereof or any Assignment and Acceptance
Agreement executed by such Lender.
Revolving Loan Percentage - with respect to each Revolving
-------------------------
Credit and Term Loan A Lender, the percentage equal to the quotient
of such Revolving Credit and Term Loan A Lender Lender's Revolving
Loan Commitment divided by the aggregate of all Revolving Loan
------- --
Commitments.
Revolving Notes - the Secured Promissory Notes to be
---------------
jointly and severally executed by Borrowers on or about the Closing
Date in favor of each Revolving
A-20
Credit and Term Loan A Lender to evidence the Revolving Credit
Loans, which shall be in the form of Exhibit 1.1 to the Agreement,
-----------
together with any replacement or successor notes therefor.
Sale Notice - a written notice by Agent to Tranche B Agent
-----------
stating that a sale, lease or other disposition of Collateral is
proposed pursuant to subsection 11.7 of the Agreement, and in each
case, providing available general details of such transaction.
Security - all shares of stock, partnership interests,
--------
membership interests, membership units or other ownership interests
in any other Person and all warrants, options or other rights to
acquire the same.
Security Documents - the Guaranty Agreements, the
------------------
Mortgages, the Pledge Agreements, the Intellectual Property
Security Agreements, and all other instruments and agreements now
or at any time hereafter securing the whole or any part of the
Obligations.
Senior Debt - as defined in the Subordinated Note
-----------
Indenture, as in existence on the Closing Date.
Solvent - as to any Person, that such Person (i) owns
-------
Property whose fair saleable value is greater than the amount
required to pay all of such Person's Indebtedness (including
contingent debts), (ii) is able to pay all of its Indebtedness as
such Indebtedness matures and (iii) has capital sufficient to carry
on its business and transactions and all business and transactions
in which it is about to engage.
Special Reserve - a permanent reserve created under
---------------
subsection 1.1.1 of the Agreement in an aggregate amount equal to
the sum of (i) all mandatory prepayments applied against the
Revolving Credit Loans pursuant to the second sentence of
subsection 3.3.1 of the Agreement, and (ii) all mandatory
prepayments in respect of Excess Cash Flow applied to the Revolving
Credit Loans, pursuant to Section 3.11 of the Agreement.
Subordinated Debt - the Subordinated Notes and any other
-----------------
Indebtedness of any Borrower or any Subsidiary that is subordinated
to the Obligations in a manner reasonably satisfactory to Agent,
and contains terms, including without limitation, payment terms,
reasonably satisfactory to Required Lenders.
Subordinated Note Debt - Falcon's Indebtedness for Money
----------------------
Borrowed in the aggregate outstanding amount of $150,000,000
incurred pursuant to the Subordinated Note Documents.
Subordinated Note Documents - the Subordinated Note
---------------------------
Indenture, the Subordinated Notes and each other agreement,
instrument or document now or hereafter evidencing or relating to
the Subordinated Note Debt.
A-21
Subordinated Note Guarantors - the "Guarantors" as defined
----------------------------
in the Subordinated Note Indenture, as in existence on the Closing
Date.
Subordinated Note Indenture - the Indenture dated as of
---------------------------
June 17, 1999 among Falcon, as Issuer, certain Subsidiaries of
Falcon, as Guarantors and the Bank of New York, as Trustee, as
amended, modified or supplemented through the date hereof and as it
may be hereafter amended, modified or supplemented from time to
time.
Subordinated Notes - the 11 3/8% Senior Subordinated Notes
------------------
due June 15, 2009, Series B, issued by Falcon pursuant to the
Subordinated Note Indenture and the other Subordinated Note
Documents.
Subsidiary - any Person of which another Person owns,
----------
directly or indirectly through one or more intermediaries, more
than 50% of the Voting Stock at the time of determination.
Term - as defined in Section 4.1 of the Agreement.
----
Term A Notes - the Secured Promissory Notes to be executed
------------
by Borrower on or about the Closing Date in favor of each
applicable Revolving Credit and Term Loan A Lender to evidence its
Term Loan A, which shall be in the form of Exhibit 1.3(A) to the
--------------
Agreement, together with any replacement or successor notes
therefor.
Term B Notes - the Secured Promissory Notes to be executed
------------
by Borrower on or about the Closing Date in favor of each
applicable Term Loan B Lender to evidence its Term Loan B, which
shall be in the form of Exhibit 1.3(B) to the Agreement, together
--------------
with any replacement or successor notes therefor.
Term Loan A - the Loan described in subsection 1.3.1 of
-----------
the Agreement.
Term Loan A Commitment - with respect to each Revolving
----------------------
Credit and Term Loan A Lender, the amount of such Revolving Credit
and Term Loan A Lender's Term Loan A Commitment pursuant to
subsection 1.3.1 of the Agreement, as set forth below such
Revolving Credit and Term Loan A Lender's name on the signature
pages hereof or any Assignment and Acceptance Agreement executed by
such Lender, minus all Term Loan A payments paid to such Revolving
-----
Credit and Term Loan A Lender.
Term Loan B - the Loan described in subsection 1.3.2 of
-----------
the Agreement.
Term Loan B Commitment - with respect to each Term Loan B
----------------------
Lender, the amount of such Term Loan B Lender's Term Loan B
Commitment pursuant to subsection 1.3.2 of the Agreement, as set
forth below such Term Loan B Lender's name on the signature pages
hereof or any Assignment and Acceptance Agreement executed by such
Term Loan B Lender, minus all Term Loan B payments paid to such
-----
Term Loan B Lender.
A-22
Term Loan B Current Interest - as defined in subsection
----------------------------
2.1.1 of the Agreement.
Term Loan B Fee Letter - as defined in subsection 2.12 of
----------------------
the Agreement.
Term Loan B Lender - any Lender with a Term Loan B
------------------
Commitment or that holds any portion of Term Loan B.
Term Loan B Obligations - all interest and principal due
-----------------------
with respect to Term Loan B and all other amounts due Term Loan B
Lenders under the Agreement or any other Loan Document.
Term Loan B PIK Interest - as defined in subsection 2.1.1
------------------------
of the Agreement.
Term Loan B Prepayment Fee - (a) with respect to any
--------------------------
prepayment of Term Loan B within twelve (12) months following the
Closing Date, an amount equal to the sum of the Term Loan B Current
Interest plus the Term Loan B PIK Interest plus commitment fees
pursuant to the Term Loan B Fee Letter, in each case that would
have accrued on the amount prepaid during the period from the date
of such prepayment through the date twelve (12) months after the
Closing Date (which amount shall be calculated to include the
effect of the increased revenue that would have resulted from
adding Term Loan B PIK Interest to the balance of Term Loan B
during such period), and (b) with respect to any prepayment made
more than twelve (12) months following the Closing Date, zero.
Term Loans - Term Loan A and Term Loan B.
----------
Total Credit Facility - $75,000,000, as reduced from time
---------------------
to time pursuant to the terms of the Agreement.
Tranche A Default Rate - as defined in subsection 2.1.2 of
----------------------
the Agreement.
Tranche B Agent - Back Bay Capital Funding LLC, in its
---------------
capacity as Tranche B Agent for the Term Loan B Lenders under the
Agreement and any successor in that capacity appointed pursuant to
subsection 13.9 of the Agreement.
Tranche B Default Rate - as defined in subsection 2.1.2 of
----------------------
the Agreement.
Type of Organization - with respect to any Person, the
--------------------
kind or type of entity by which such Person is organized, such as a
corporation or limited liability company.
UCC - the Uniform Commercial Code as in effect in the
---
State of Illinois on the date of this Agreement, as it may be
amended or otherwise modified.
Unrestricted Subsidiary - as defined in the Subordinated
-----------------------
Note Indenture, as in existence on the Closing Date.
A-23
Unused Line Fee - as defined in Section 2.5 of the
---------------
Agreement.
Voting Stock - Securities of any class or classes of a
------------
corporation, limited partnership or limited liability company or
any other entity the holders of which are ordinarily, in the
absence of contingencies, entitled to vote with respect to the
election of corporate directors (or Persons performing similar
functions).
OTHER TERMS. All other terms contained in the Agreement
-----------
shall have, when the context so indicates, the meanings provided for by the
UCC to the extent the same are used or defined therein.
CERTAIN MATTERS OF CONSTRUCTION. The terms "herein",
-------------------------------
"hereof" and "hereunder" and other words of similar import refer to the
Agreement as a whole and not to any particular section, paragraph or
subdivision. Any pronoun used shall be deemed to cover all genders. The
section titles, table of contents and list of exhibits appear as a matter of
convenience only and shall not affect the interpretation of the Agreement.
All references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations. All
references to any of the Loan Documents shall include any and all
modifications thereto and any and all extensions or renewals thereof.
A-24
LIST OF EXHIBITS
Exhibit 1.1 Form of Revolving Note
Exhibit 1.3(A) Form of Term A Note
Exhibit 1.3(B) Form of Term B Note
Exhibit 6.1.1 Business Locations
Exhibit 7.1.1 Jurisdictions in which each Borrower and each
Subsidiary is Authorized to do Business
Exhibit 7.1.4 Capital Structure of each Borrower and each
Subsidiary
Exhibit 7.1.5 Names; Organization
Exhibit 7.1.13 Surety Obligations
Exhibit 7.1.14 Tax Identification Numbers of each Borrower and
each Restricted Subsidiary
Exhibit 7.1.15 Brokers' Fees
Exhibit 7.1.16 Patents, Trademarks, Copyrights and Licenses
Exhibit 7.1.19 Contracts Restricting Right to Incur Debts
Exhibit 7.1.20 Litigation
Exhibit 7.1.21 Defaults
Exhibit 7.1.22 Capitalized and Operating Leases
Exhibit 7.1.23 Pension Plans
Exhibit 7.1.25 Labor Relations
Exhibit 7.1.27 Disclosures re: Subordinated Note Indenture
Exhibit 8.1.3 Form of Compliance Certificate
Exhibit 8.1.4 Form of Borrowing Base Certificate
Exhibit 8.2.3 Existing Indebtedness
Exhibit 8.2.4 Affiliate Transactions
Exhibit 8.2.5 Permitted Liens
Exhibit 8.2.12 Permitted Investments
Exhibit 8.3 Financial Covenants
List of Exhibits
EXHIBIT 1.1
FORM OF REVOLVING NOTE
Exhibit 1.1 - Page 1
EXHIBIT 1.3(A)
FORM OF TERM A NOTE
Exhibit 1.3(A) - Page 1
EXHIBIT 1.3(B)
FORM OF TERM B NOTE
Exhibit 1.3(B) - Page 1
EXHIBIT 8.1.3
COMPLIANCE CERTIFICATE
[------------------------]
------------------, ---
Fleet Capital Corporation, as Agent
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Falcon Products, Inc. ("Falcon"), gives this certificate
to Fleet Capital Corporation, in its capacity as Agent ("Agent") in
accordance with the requirements of subsection 8.1.3 of that certain Loan
and Security Agreement dated June __, 2003 among Falcon, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Industries, Inc. and Sellers & ▇▇▇▇▇▇▇▇▇ Inc. (collectively, "Borrowers"),
Agent and the Lenders party thereto ("Loan Agreement"). Capitalized terms
used in this Certificate, unless otherwise defined herein, shall have the
meanings ascribed to them in the Loan Agreement.
1. Falcon hereby certifies that, based upon the balance
sheets and statements of income of Borrowers and the Subsidiaries for the
[__________] period ending _______________, ____, copies of which are
attached hereto, and as demonstrated in the attached covenant compliance
certificate:
(i) Capital Expenditures during the period and
for the fiscal year to date total $__________ and $__________,
respectively.
(ii) The Fixed Charge Coverage Ratio as of the
last day of the period is ______:1.00. [TO BE ADDED ONLY AT FISCAL
QUARTER END DATES BEGINNING JULY 31, 2003].
(iii) EBITDA for the period of twelve (12)
consecutive fiscal months ending on the last day of the period was
$_________. [TO BE ADDED ONLY AT FISCAL QUARTER END DATES BEGINNING
JULY 31, 2003].
(iv) Domestic EBITDA for the fiscal quarter
ending on the last of the period was _____% of EBITDA. [TO BE ADDED
ONLY AT FISCAL QUARTER END DATES BEGINNING JULY 31, 2003].
(v) The ratio of Consolidated Secured Funded Debt
to Consolidated EBITDA for the period of twelve (12) consecutive
fiscal months ending on the last
Exhibit 8.1.3 - Page 1
day of the period is ______:1.00. [TO BE ADDED ONLY AT FISCAL QUARTER
END DATES BEGINNING JULY 31, 2003].
2. No Default exists on the date hereof, other than:
___________________________________________________________________ [IF
NONE, SO STATE]; and
3. No Event of Default exists on the date hereof, other
than _______________________________________________________________ [IF
NONE, SO STATE].
Very truly yours,
FALCON PRODUCTS, INC.
By: _______________________________
Chief Financial Officer
Exhibit 8.1.3 - Page 2
EXHIBIT 8.1.4
FORM OF BORROWING BASE CERTIFICATE
Attached
Exhibit 8.1.4 - Page 1
FLEET CAPITAL Borrowing Certificate
Customer Name: Falcon Products, Inc.
Assignment #:
Report Date:
-----------------------------------------------------------------------------------------------------------------------------------
INVENTORY_________ LOAN #
ACCOUNTS RECEIVABLE LOAN # FAL00 Dates covered: 04/30/03
Dates covered: 4/30/03 COLLATERAL FAL05
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
1. BEGINNING BALANCE _____________ 1. BEGINNING BALANCE _____________
-----------------------------------------------------------------------------------------------------------------------------------
2. Sales (+) 2. Adjustments (+) _____________
-----------------------------------------------------------------------------------------------------------------------------------
3. Credit Memos (-) 3. Adjustments (-)
-----------------------------------------------------------------------------------------------------------------------------------
4. Adjustments (+) _____________ 4. CURRENT BALANCE _____________
-----------------------------------------------------------------------------------------------------------------------------------
5. Adjustments (-) 5. Ineligibles _____________
-----------------------------------------------------------------------------------------------------------------------------------
6. Net Collections (-) 6. Eligible Collateral (4-5) _____________
-----------------------------------------------------------------------------------------------------------------------------------
7. Discounts (-) 7. Eligible Inventory @ 28.53% _____________
-----------------------------------------------------------------------------------------------------------------------------------
8. Overpayments, Misc. Cash (+) 8. Less Reserve
-----------------------------------------------------------------------------------------------------------------------------------
9. Unapplied Cash (-) 9. QUALIFIED INVENTORY _____________
-----------------------------------------------------------------------------------------------------------------------------------
10. CURRENT BALANCE _____________ 10. AVAILABILITY = #7 OR $17,500,000 _____________
-----------------------------------------------------------------------------------------------------------------------------------
11. Ineligible _____________
-----------------------------------------------------------------------------------------------------------------------------------
12. Eligible Collateral (10-11) _____________
-----------------------------------------------------------------------------------------------------------------------------------
13. Eligible A/R @ 85% _____________
-----------------------------------------------------------------------------------------------------------------------------------
14. Less Reserve
-----------------------------------------------------------------------------------------------------------------------------------
15. QUALIFIED COLLATERAL _____________
-----------------------------------------------------------------------------------------------------------------------------------
16. AVAILABILITY = #15 OR LESSER OF $33,450,000 _____________
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
LOAN
-----------------------------------------------------------------------------------------------------------------------------------
17. BEGINNING BALANCE ______
-----------------------------------------------------------------------------------------------------------------------------------
18. Cash (Checks/ACH) (-) ______
-----------------------------------------------------------------------------------------------------------------------------------
19. Cash (Wire) (-) ______
-----------------------------------------------------------------------------------------------------------------------------------
20. Adjustments (-/+) (circle one) ______
-----------------------------------------------------------------------------------------------------------------------------------
21. Advance (+) ______
-----------------------------------------------------------------------------------------------------------------------------------
22. CURRENT REVOLVING LOAN BALANCE @ ______
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL AVAILABILITY = LESSER OF 16 + 10 OR $33,450,000 _____________
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL CREDIT LINE _____________
-----------------------------------------------------------------------------------------------------------------------------------
QUALIFIED AVAILABILITY _____________
-----------------------------------------------------------------------------------------------------------------------------------
Less Total Revolving Loan Balance _____________
-----------------------------------------------------------------------------------------------------------------------------------
Less Letters of Credit _____________
-----------------------------------------------------------------------------------------------------------------------------------
Exhibit 8.1.4 - Page 2
REMAINING AVAILABILITY _____________
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Explanation:
-----------------------------------------------------------------------------------------------------------------------------------
The foregoing information is delivered to Fleet Capital Prepared by:
in accordance with a Loan and Security Agreement among ------------------------------------------------------
the lenders party thereto, Fleet Capital Corporation
and Falcon Products, Inc. dated: June 3, 2003. Title: Date:
I hereby certify that the information contained herein is true ------------------------------------------------------
and correct as of the dates shown herein. Nothing contained
herein shall constitute a waiver, modification, or limitation of Approved by:
any of the terms or conditions set forth in the referenced Loan ------------------------------------------------------
and Security Agreement.
Title: Date:
------------------------------------------------------
BRACKETS ARE NOT NECESSARY FOR NEGATIVE NUMBERS
-----------------------------------------------
UNLESS WHAT YOU WANT IS DIFFERENT THAN WHAT FIELD INDICATES.
WE BUILD RELATIONSHIPS
Exhibit 8.1.4 - Page 3
[LOGO] FLEET CAPITAL
A FleetBoston Financial Company
A/R INELIGIBLES
--- -----------
==================================================================================================================================
Client Name: Falcon Industries, Inc.
----------------------------------------------------------------------------------------------------------------------------------
Client Number: FAL00
----------------------------------------------------------------------------------------------------------------------------------
Date:
==================================================================================================================================
Total Current / Dating 1 - 30 31 - 60 61 - 90 91 - 120 Over 120
----------------------------------------------------------------------------------------------------------------------------------
Aging Summary
----------------------------------------------------------------------------------------------------------------------------------
Percent to Gross
==================================================================================================================================
Following is a listing of the ineligible accounts receivable as of: __________ 4/30/2003
==================================================================================================================================
[ ] RECEIVABLES INELIGIBLE BY REASON OF AGE:
----------------------------------------------------------------------------------------------------------------------------------
[ ] Invoice amounts over 90 days old (2) $___________
----------------------------------------------------------------------------------------------------------------------------------
[ ] Current accounts with substantial past due balances (i.e. crossed aged balance) ___% (3) $___________
----------------------------------------------------------------------------------------------------------------------------------
[ ] RECEIVABLES INELIGIBLE FOR OTHER REASONS:
----------------------------------------------------------------------------------------------------------------------------------
[ ] Due from debtors who are suppliers or creditors (commonly known as "Contra Items") (4)
----------------------------------------------------------------------------------------------------------------------------------
[ ] Due from affiliates and/or subsidiaries (5)
----------------------------------------------------------------------------------------------------------------------------------
[ ] Due from officers and/or employees (5)
----------------------------------------------------------------------------------------------------------------------------------
[ ] Due from debtors contingently on guaranteed sales and/or consignments (5)
----------------------------------------------------------------------------------------------------------------------------------
[ ] Aged Credit Balances > 90 days old (5) $__________
----------------------------------------------------------------------------------------------------------------------------------
[ ] Due from other than U.S. or Canadian debtors (5) $__________
----------------------------------------------------------------------------------------------------------------------------------
[ ] Government Purchases < 90 days old (5) $__________
----------------------------------------------------------------------------------------------------------------------------------
[ ] Amounts ineligible for reasons other than above - see list below:
----------------------------------------------------------------------------------------------------------------------------------
A.) Installation A/R $____________
----------------------------------------------------------------------------------------------------------------------------------
B.) Deposits on Hold $____________
----------------------------------------------------------------------------------------------------------------------------------
C.) Accrued Cash Receipts $____________
----------------------------------------------------------------------------------------------------------------------------------
D.)
----------------------------------------------------------------------------------------------------------------------------------
[ ] Total amounts ineligible for reasons other than above (5) $__________
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL (5) $__________
----------------------------------------------------------------------------------------------------------------------------------
[ ] TOTAL RECEIVABLES INELIGIBLE FOR BORROWING PURPOSES [(2), (3), (4), (5)] $__________
----------------------------------------------------------------------------------------------------------------------------------
Exhibit 8.1.4 - Page 4
-------------------------------------------------------------------------------------------------------
[ ] PREVIOUS INELIGIBLE RECEIVABLES FOR BORROWING PURPOSES: $ 0.00
----------------------------------------------------------------------------------------------------------------------------------
[ ] DIFFERENCE: $__________
==================================================================================================================================
Loan Servicing Admin.: Date:
----------------------------------------------------------------------------------------------------------------------------------
Loan Officer: Date Adjusted:
==================================================================================================================================
Exhibit 8.1.4 - Page 5
[LOGO] FLEET CAPITAL
A FleetBoston Financial Company
INVENTORY INELIGIBLES
--------- -----------
==================================================================================================================================
Client Name: Falcon Industries, Inc.
----------------------------------------------------------------------------------------------------------------------------------
Client Number: FAL05
----------------------------------------------------------------------------------------------------------------------------------
Date:
==================================================================================================================================
---------------------------------------------------------
Finished Goods $________
---------------------------------------------------------
Work in Process $________
---------------------------------------------------------
Raw Materials $________
---------------------------------------------------------
Total Inventory $________
==================================================================================================================================
Following is a listing of the ineligible inventory as of: _________
===================================================================================================================================
[ ] INELIGIBLE INVENTORY:
-----------------------------------------------------------------------------------------------------------------------------------
[ ] Slow Moving/Obsolete Inventory (1) $___________
-----------------------------------------------------------------------------------------------------------------------------------
[ ] Consigned Stock (1) $___________
-----------------------------------------------------------------------------------------------------------------------------------
[ ] In - Transit (1) $___________
-----------------------------------------------------------------------------------------------------------------------------------
[ ] Packaging & Supplies (1) $___________
-----------------------------------------------------------------------------------------------------------------------------------
[ ] Inventory located at Outside locations (1) $___________
-----------------------------------------------------------------------------------------------------------------------------------
[ ] Miscellaneous $___________
-----------------------------------------------------------------------------------------------------------------------------------
--------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
[ ] Total amounts ineligible for reasons other than above (2) $___________
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
[ ] TOTAL INVENTORY INELIGIBLE FOR BORROWING PURPOSES [(1), (2)] $___________
-----------------------------------------------------------------------------------------------------------------------------------
[ ] PREVIOUS INELIGIBLE INVENTORY FOR BORROWING PURPOSES: $___________
-----------------------------------------------------------------------------------------------------------------------------------
[ ] DIFFERENCE: $___________
===================================================================================================================================
Loan Servicing Admin.: Date:
-----------------------------------------------------------------------------------------------------------------------------------
Loan Officer: Date Adjusted:
===================================================================================================================================
Exhibit 8.1.4 - Page 6
INVENTORY SUMMARY
----------------------------------------------------------------------------------------------------------------------------------
FYE _______ Prior Month Current _______
----------------------------------------------------------------------------------------------------------------------------------
Inventory Breakdown $$$ % $$$ % $$$ %
----------------------------------------------------------------------------------------------------------------------------------
Raw Materials
Packaging 0 0 0 0 0 0
Miscellaneous 0 0 0 0 0 0
Work In Process 0 0 0 0 0 0
---------------------------------------------------------------------------------------
Finished Goods 0 0 0 0 0 0
---------------------------------------------------------------------------------------
Gross Inventory 0 100% 0 100% 0 100%
=======================================================================================
Reconciling Items 0 0 0 0 0 0
---------------------------------------------------------------------------------------
Net Inventory Per
Balance Sheet 0 0 0 0 0 0
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
Gross Prime
Inventory Type Inventory Ineligible Inventory Advance % Availability
----------------------------------------------------------------------------------------------------------------------------------
Raw ___________ ___________ ___________ ____% __________
Wip ___________ ___________ ___________ ____% __________
Packaging - - - ____% -
Miscellaneous - - - ____% -
Finished Goods ___________ ___________ ___________ ____% __________
======================================================================================================
Totals ___________ ___________ ___________ ____% __________
----------------------------------------------------------------------------------------------------------------------------------
Exhibit 8.1.4 - Page 7
EXHIBIT 8.3
FINANCIAL COVENANTS
DEFINITIONS
Consolidated Funded Debt - with respect to the Borrowers and their
------------------------
Subsidiaries, the sum, without duplication, of (a) the aggregate amount of
Indebtedness of the Borrowers and their Subsidiaries, on a Consolidated
basis, for or in respect of (i) the borrowing of money or the obtaining of
credit, including the issuance of notes or bonds, (ii) the deferred purchase
price of assets (other than trade payables incurred in the ordinary course
of business), (iii) any synthetic leases or any Capitalized Leases, and (iv)
the maximum drawing amount of all letters of credit outstanding plus (b)
Indebtedness of the type referred to in clause (a) of another Person
guaranteed by the Borrowers or any of their Subsidiaries.
Consolidated Secured Funded Debt - with respect to the Borrowers
--------------------------------
and their Subsidiaries all Consolidated Funded Debt which is secured by a
lien on any of the assets of the Borrowers and their Subsidiaries.
EBITDA - with respect to any period, without duplication, the total
------
of the following for the Borrowers and their Subsidiaries on a Consolidated
basis, each calculated for such period: (a) net income determined in
accordance with GAAP; plus, to the extent included in the calculation of net
income, (b) the sum of (i) income taxes paid or accrued during such period;
(ii) interest expense paid or accrued during such period, (iii) amortization
and depreciation during such period (as reduced by deferred financing fees
amortized during such period), and (iv) non-operating or non-recurring
non-cash losses, less, to the extent included in the calculation of net
income, (c) the sum of (i) gains from sales or other dispositions of assets
(other than sales of Inventory in the normal course of business); and (ii)
non-operating or non-recurring gains, but not net of non-operating or
non-recurring cash losses.
Fixed Charge Coverage Ratio - with respect to any period, the ratio
---------------------------
of (a) the result of (i) EBITDA for such period, minus (ii) non-financed
Capital Expenditures made during such period, minus (iii) income taxes paid
or required to be paid in cash during such period to (b) the sum of (i)
Interest Expense paid or required to be paid in cash during such period,
plus (ii) principal payments made or required to be made during such period
on Consolidated Funded Debt (including the principal portion of Capitalized
Lease Obligations, but excluding (I) principal payments of revolving credit
facilities, whether foreign or domestic and (II) principal payments made
with proceeds of equity issuances, asset sales, and/or insurance
recoveries), plus (iii) Distributions made during such period, plus (iv)
cash contributions to pension plans in excess of pension expense during such
period all as determined for Borrowers and their Subsidiaries on a
Consolidated basis in accordance with GAAP.
Interest Expense - with respect to any period, the sum of (a) cash
----------------
interest expense paid or accrued for such period, including without
limitation the interest portion of Capitalized Lease Obligations plus the
Letter of Credit and LC Guaranty fees owing for such period, plus (b) other
financing costs during such period, including, without limitation and
without duplication,
Exhibit 8.3 - Page 1
commitment fees, termination fees, amendment fees, unused line fees, all as
determined for Borrowers and their Subsidiaries on a Consolidated basis and
in accordance with GAAP.
FINANCIAL COVENANTS
I. FIXED CHARGE COVERAGE
Borrowers will not permit the Fixed Charge Coverage Ratio,
determined as of the end of each fiscal quarter set forth in the table below
for the period of four consecutive fiscal quarters then ending, to exceed
the ratio set forth opposite such quarter end date:
12 month period ended 7/31/03 1.00x
12 month period ended 10/31/03 0.92x
12 month period ended 1/31/04 0.92x
12 month period ended 4/30/04 0.92x
12 month period ended 7/31/04 0.95x
12 month period ended 10/31/04 1.00x
12 month period ended 1/31/05 1.05x
12 month period ended 4/30/05 1.10x
12 month period ended 7/31/05 1.15x
12 month period ended 10/31/05 1.15x
12 month period ended 1/31/06 1.15x
12 month period ended 4/30/06 1.20x
12 month period ended 7/31/06 1.25x
12 month period ended 10/31/06 1.25x
and each quarterly covenant test
period thereafter
Provided that, for purposes of calculating the Fixed Charge Coverage Ratio
(i) for the fiscal quarter ending 7/31/03,
(a) EBITDA shall be the sum of EBITDA for the fiscal
quarter then ending plus $18,958,000,
(b) non-financed Capital Expenditures shall be
the sum of non-financed Capital Expenditures for the fiscal quarter
then ending plus $2,030,000, and
(c) Contributions to pension plans in excess of
pension expense shall be the sum of such contributions to pension
plans in excess of pension expense for the fiscal quarter then
ending plus $1,009,000;
(ii) for the fiscal quarter ending 10/31/03,
Exhibit 8.3 - Page 2
(a) EBITDA shall be the sum of EBITDA for the two
(2) fiscal quarters then ending plus $11,242,000,
(b) non-financed Capital Expenditures shall be
the sum of non-financed Capital Expenditures for the two (2) fiscal
quarters then ending plus $1,288,000, and
(c) Contributions to pension plans in excess of
pension expense shall be the sum of such contributions to pension
plans in excess of pension expense for the two (2) fiscal quarters
then ending plus $1,315,000;
(iii) for the fiscal quarter ending 1/31/04,
(a) EBITDA shall be the sum of EBITDA for the
three (3) fiscal quarters then ending plus $5,332,000,
(b) non-financed Capital Expenditures shall be
the sum of non-financed Capital Expenditures for the three (3)
fiscal quarters then ending plus $565,000, and
(c) Contributions to pension plans in excess of
pension expense shall be the sum of such contributions to pension
plans in excess of pension expense for the three (3) fiscal
quarters then ending plus $697,000.
Provided further, for each of the 12 month periods ending on 7/31/03,
10/31/03, 1/31/04, and 4/30/04, (i) Interest Expense for each such period
shall be deemed to be $17,000,000, (ii) principal payments made or required
to be made during such period shall be deemed to be $1,100,000 plus the
amount of voluntary principal payments made during such period, and (iii)
the amount of income taxes for such period shall be deemed to be $400,000.
II. EBITDA
As tested on a quarterly rolling/trailing 12 month basis must be
equal to or greater than the amounts set forth below:
12 month period ended 7/31/03 $24,000,000
12 month period ended 10/31/03 $25,000,000
12 month period ended 1/31/04 $25,500,000
12 month period ended 4/30/04 $25,500,000
12 month period ended 7/31/04 $25,500,000
12 month period ended 10/31/04 $26,000,000
12 month period ended 1/31/05 $26,500,000
12 month period ended 4/30/05 $27,000,000
12 month period ended 7/31/05 $28,000,000
12 month period ended 10/31/05 $28,000,000
12 month period ended 1/31/06 $29,000,000
12 month period ended 4/30/06 $30,000,000
Exhibit 8.3 - Page 3
12 month period ended 7/31/06 $31,000,000
12 month period ended 10/31/06 $32,000,000
and each quarterly covenant test
period thereafter
Provided that, for purposes of calculating EBITDA:
(i) for the fiscal year quarter ending July 31, 2003,
EBITDA shall be the sum of EBITDA for the fiscal quarter then
ending plus $18,958,000,
(ii) for the fiscal quarter ending October 31, 2003,
EBITDA shall be the sum of EBITDA for the two (2) fiscal quarters
then ending plus $11,242,000, and
(iii) for the fiscal quarter ending January 31, 2004,
EBITDA shall be the sum of EBITDA for the three (3) fiscal quarters
then ending plus $5,332,000.
III. CONSOLIDATED SECURED FUNDED DEBT TO CONSOLIDATED EBITDA
Borrowers will not permit the ratio, determined as of the end of
each fiscal quarter set forth in the table below of (a) Consolidated Secured
Funded Debt to (b) Consolidated EBITDA for the period of four consecutive
fiscal quarters then ending, to exceed the ratio set forth opposite such
quarter end date:
Period ended 7/31/03 2.75x
Period ended 10/31/03 2.50x
Period ended 1/31/04 2.50x
Period ended 4/30/04 2.50x
Period ended 7/31/04 2.50x
Period ended 10/31/04 2.50x
Period ended 1/31/05 2.50x
Period ended 4/30/05 2.25x
Period ended 7/31/05 2.25x
Period ended 10/31/05 and 2.00x
each quarterly covenant test
period thereafter
IV. MINIMUM DOMESTIC EBITDA
Borrowers will not, for any fiscal quarter, permit the EBITDA
directly generated by Borrowers and their Domestic Subsidiaries to be less
than 87.5% of the Consolidated EBITDA of Borrowers and their Subsidiaries.
Exhibit 8.3 - Page 4
